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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 20-F





(Mark One)



| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended March 31, 2012.

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to
            .

OR



| ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report

Commission file number: 001-34988





SKY-MOBI LIMITED

(Exact name of Registrant as specified in its charter)





N/A

(Translation of Registrants name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

10/F, Building B,
United Mansion

No. 2 Zijinghua Road, Hangzhou

Zhejiang 310013

Peoples Republic of China

(Address of principal executive offices)





Carl Yeung, Chief Financial Officer

Tel: +(86) 571-8777-0978

E-mail: ir@sky-mobi.com

Facsimile number: +(86) 571-8775-8616

10/F, Building B, United Mansion

No. 2, Zijinghua Road, Hangzhou

Zhejiang 310013

Peoples Republic of China

(Name, Telephone, E-mail and/or
Facsimile number and Address of Company Contact Person)





Securities
registered or to be registered pursuant to Section 12(b) of the Act.





|                                                                                                    |  |                                          
|--------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Title of Each Class                                                                                 |  | Name of Each Exchange on Which
Registered
|                                                                                                    | 
|American Depositary Shares, each representing eight
common shares of par value US$0.00005 per share |  | NASDAQ Global Market                     



Securities registered or to be
registered pursuant to Section 12(g) of the Act.

NONE

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

NONE

(Title of Class)





Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report:

261,389,800 common shares of par value US$0.00005 per share, as of March 31, 2012.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.     ̈  Yes    x  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.     ̈  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).     ̈  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one):

 ̈  Large accelerated
filer             ̈  Accelerated filer            x  Non-accelerated filer

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:



| |  ̈ | U.S. GAAP
| | - | ---------



| | x | International Financial Reporting Standards as issued by the International Accounting Standards Board
| | - | -----------------------------------------------------------------------------------------------------



| |  ̈ | Other
| | - | -----

If Other has been checked in
response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.     ̈  Item 17     ̈  Item 18

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).     ̈  Yes    x  No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.     ̈  Yes     ̈  No









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##### Table of Contents

TABLE OF CONTENTS



|                                       |  |           |     |                                                                              |  |      |     | 
|-------------------------------------- |  | --------- | --- | ---------------------------------------------------------------------------- |  | ---- | --- | 
|                                       |  |           |     |                                                                              |  | Page |    
|                                       | 
|CONVENTIONS USED IN THIS ANNUAL REPORT |  |           | 1   |                                                                             
|                                       | 
|PART I                                 |  |           | 2   |                                                                             
|                                       |  |           |    
|                                       |  | ITEM 1.   |     | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                        |  |      | 2   | 
|                                       |  | ITEM 2.   |     | OFFER STATISTICS AND EXPECTED TIMETABLE                                      |  |      | 2   | 
|                                       |  | ITEM 3.   |     | KEY INFORMATION                                                              |  |      | 2   | 
|                                       |  | ITEM 4.   |     | INFORMATION ON THE COMPANY                                                   |  |      | 33  | 
|                                       |  | ITEM 4A.  |     | UNRESOLVED STAFF COMMENTS                                                    |  |      | 60  | 
|                                       |  | ITEM 5.   |     | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                 |  |      | 60  | 
|                                       |  | ITEM 6.   |     | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                   |  |      | 85  | 
|                                       |  | ITEM 7.   |     | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                            |  |      | 93  | 
|                                       |  | ITEM 8.   |     | FINANCIAL INFORMATION                                                        |  |      | 96  | 
|                                       |  | ITEM 9.   |     | THE OFFER AND LISTING                                                        |  |      | 97  | 
|                                       |  | ITEM 10.  |     | ADDITIONAL INFORMATION                                                       |  |      | 98  | 
|                                       |  | ITEM 11.  |     | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  |      | 111 | 
|                                       |  | ITEM 12.  |     | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  |      | 112 | 
|                                       | 
|PART II                                |  |           | 114 |                                                                             
|                                       |  |           |    
|                                       |  | ITEM 13.  |     | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  |      | 114 | 
|                                       |  | ITEM 14.  |     | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  |      | 114 | 
|                                       |  | ITEM 15.  |     | CONTROLS AND PROCEDURES                                                      |  |      | 115 | 
|                                       |  | ITEM 16A. |     | AUDIT COMMITTEE FINANCIAL EXPERT                                             |  |      | 116 | 
|                                       |  | ITEM 16B. |     | CODE OF ETHICS                                                               |  |      | 116 | 
|                                       |  | ITEM 16C. |     | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |  |      | 116 | 
|                                       |  | ITEM 16D. |     | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |  |      | 117 | 
|                                       |  | ITEM 16E. |     | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.      |  |      | 117 | 
|                                       |  | ITEM 16F. |     | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                 |  |      | 117 | 
|                                       |  | ITEM 16G. |     | CORPORATE GOVERNANCE                                                         |  |      | 117 | 
|                                       | 
|PART III                               |  |           | 117 |                                                                             
|                                       |  |           |    
|                                       |  | ITEM 17.  |     | FINANCIAL STATEMENTS                                                         |  |      | 117 | 
|                                       |  | ITEM 18.  |     | FINANCIAL STATEMENTS                                                         |  |      | 117 | 
|                                       |  | ITEM 19.  |     | EXHIBITS                                                                     |  |      | 117 | 



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##### Table of Contents

CONVENTIONS USED IN THIS ANNUAL REPORT

In this annual report, unless otherwise indicated, (1) we, us, our company, our or
Sky-mobi refers to Sky-mobi Limited, a Cayman Islands company, its predecessor entities, subsidiaries and consolidated special purpose entities, or SPEs, controlled by Sky-mobi Limited; (2) China or PRC
refers to the Peoples Republic of China, excluding Taiwan, Hong Kong and Macau; (3) shares or common shares refers to our common shares, par value US$0.00005 per share; ADSs refers to our American
depositary shares, each of which represents eight common shares; and ADRs refers to the American depositary receipts which evidence our ADSs; (4) all references to RMB or Renminbi are to the legal currency of
China; and all references to $, US$ and U.S. dollars are to the legal currency of the United States; (5) all discrepancies in any table between the amounts identified as total amounts and the sum of the
amounts listed therein are due to rounding; and (6) all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report were made at a rate of RMB6.2975 to US$1.00, the noon buying rate in effect as of March 30,
2012, as set forth in the H.10 statistical release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on
March 30, 2012, or at any other rate.

The mobile application store is a platform that allows users of mobile phones to
browse and download applications and content. The mobile application store can either be pre-installed or downloaded over-the-air from a website. Applications and content provided by the mobile application store can be developed either in-house or
by third-party developers. The mobile application store generates revenues by selling applications and content to mobile phone users, who pay through mobile network operators or other third-party payment providers.

Mobile service providers are payment service providers who utilize mobile network operators billing channels pursuant to their
agreements with mobile network operators.

The number of user visits to Maopao refers to the number of visits to our servers
for browsing content on the menu of the Maopao application store.

The number of downloads of applications and content titles
on Maopao refers to the number of requests made by our mobile users for downloading a particular application or a content title, or for authorization to access a specified feature of a particular application or a content title from Maopao. There may
be multiple download requests made by a user for an application depending on the complexity of the application and whether interruptions occurred during the downloading process.

When calculating the number of Maopao users, we count an individual who uses a particular handset with a particular SIM card to access
Maopao as one user. Therefore, an individual who accesses Maopao through one handset with two SIM cards separately will be counted as two users, while an individual who accesses Maopao through two handsets using the same SIM card will also be
counted as two users.

The number of active Maopao Community members refers to the number of registered members who logged on
to the Maopao Community at least twice a month for the relevant quarter.

This annual report on Form 20-F includes our
audited consolidated statements of operations for the fiscal years ended March 31, 2010, 2011 and 2012, and consolidated balance sheet data as of March 31, 2010, 2011 and 2012.

On December 15, 2010, we completed the initial public offering of 6,125,000 ADSs, each representing eight common shares of par
value US$0.00005 per share. On December 10, 2010, we listed our ADSs on the NASDAQ Global Market, or NASDAQ, under the ticker symbol MOBI.



1



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##### Table of Contents

PART I



|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- | -----------------------------------------------------

Not Applicable.



|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------

Not Applicable.



|ITEM 3. | KEY INFORMATION
|------- | ---------------



| | A. | Selected Financial Data
| | -- | -----------------------

We have derived our selected consolidated statement of comprehensive income data for the fiscal years ended March 31, 2010, 2011 and
2012 and the selected consolidated statement of financial position data as of March 31, 2010, 2011 and 2012 from our audited consolidated financial statements included in this annual report. Our selected consolidated statement of comprehensive
income data for the fiscal years ended March 31, 2008 and 2009 and the selected consolidated statement of financial position data as of March 31, 2008 and 2009 have been derived from our audited consolidated financial statements not
included in this annual report. Our consolidated financial statements are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.

You should read the selected consolidated financial data set forth below in conjunction with the related notes and Item 5.
Operating and Financial Review and Prospects.



|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|------------------------------------------------------------------------------- |  | ---------------------------------------------------------- | ------- | - | ---- |  | -------- | ---- |  |  | -------- | - |  | ---- | -------- | - | --- |  | -------- | - |  |  | ------- | -
|                                                                                |  | For the Fiscal Year Ended March 31,                        |        
|                                                                                |  | 2008                                                       |         |   | 2009 |  |          | 2010 |  |  | 2011     |   |  | 2012 |         
|                                                                                |  | RMB                                                        |         |   | RMB  |  |          | RMB  |  |  | RMB      |   |  | RMB  |          |   | US$ | 
|                                                                                |  | (in thousands, except number of shares and per share data) |        
|Consolidated Statements of Comprehensive Income Data                            |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Revenues                                                                        |  |                                                            | 18,594  |   |      |  | 207,239  |      |  |  | 544,258  |   |  |      | 675,294  |   |     |  | 685,563  |   |  |  | 108,863 |  
|Cost of revenues from third parties                                             |  |                                                            | (9,681  | ) |      |  | (134,558 | )    |  |  | (353,106 | ) |  |      | (461,422 | ) |     |  | (465,479 | ) |  |  | (73,915 | )
|Cost of revenues from related parties                                           |  |                                                            |        |   |      |  | (129     | )    |  |  | (1,245   | ) |  |      | (3,415   | ) |     |  | (5,546   | ) |  |  | (881    | )
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Gross profit                                                                    |  |                                                            | 8,913   |   |      |  | 72,552   |      |  |  | 189,907  |   |  |      | 210,457  |   |     |  | 214,538  |   |  |  | 34,067  |  
|Research and development expenses                                               |  |                                                            | (1,283  | ) |      |  | (12,902  | )    |  |  | (26,900  | ) |  |      | (52,260  | ) |     |  | (71,088  | ) |  |  | (11,289 | )
|Sales and marketing expenses                                                    |  |                                                            | (800    | ) |      |  | (5,293   | )    |  |  | (21,511  | ) |  |      | (38,200  | ) |     |  | (37,361  | ) |  |  | (5,933  | )
|General and administration expenses                                             |  |                                                            | (12,123 | ) |      |  | (16,725  | )    |  |  | (17,507  | ) |  |      | (98,938  | ) |     |  | (83,996  | ) |  |  | (13,338 | )
|Other operating income, net                                                     |  |                                                            |        |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  | 3,675    |   |  |  | 584     |  
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Profit (loss) from operations                                                   |  |                                                            | (5,293  | ) |      |  | 37,632   |      |  |  | 123,989  |   |  |      | 21,059   |   |     |  | 25,768   |   |  |  | 4,091   |  
|Other gains and losses                                                          |  |                                                            | 417     |   |      |  | 857      |      |  |  | 3,531    |   |  |      | 11,179   |   |     |  | 11,649   |   |  |  | 1,850   |  
|Impairment of investment in an associate                                        |  |                                                            |        |   |      |  |         |      |  |  |         |   |  |      | (5,760   | ) |     |  |         |   |  |  |        |  
|Finance costs                                                                   |  |                                                            | (1,329  | ) |      |  |         |      |  |  | (5,417   | ) |  |      | (4,333   | ) |     |  |         |   |  |  |        |  
|Share of results of associates                                                  |  |                                                            |        |   |      |  | (83      | )    |  |  | (1,255   | ) |  |      | (6,012   | ) |     |  | (886     | ) |  |  | (141    | )
|Gain (loss) on changes in fair value of convertible redeemable preferred shares |  |                                                            | (4,156  | ) |      |  | (134,616 | )    |  |  | (290,135 | ) |  |      | 106,684  |   |     |  |         |   |  |  |        |  
|Gain (loss) on changes in fair value of warrants                                |  |                                                            | (239    | ) |      |  | (18,423  | )    |  |  | (7,548   | ) |  |      | 7,377    |   |     |  |         |   |  |  |        |  
|Loss on modification of convertible redeemable preferred shares                 |  |                                                            |        |   |      |  |         |      |  |  | (44,439  | ) |  |      |         |   |     |  |         |   |  |  |        |  
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Profit (loss) before tax                                                        |  |                                                            | (10,600 | ) |      |  | (114,633 | )    |  |  | (221,274 | ) |  |      | 130,194  |   |     |  | 36,531   |   |  |  | 5,800   |  
|Income tax benefit (expense)                                                    |  |                                                            |        |   |      |  | 1,180    |      |  |  | (8,528   | ) |  |      | 5,367    |   |     |  | (3,602   | ) |  |  | (572    | )
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Profit (loss) for the year                                                      |  |                                                            | (10,600 | ) |      |  | (113,453 | )    |  |  | (229,802 | ) |  |      | 135,561  |   |     |  | 32,929   |   |  |  | 5,228   |  
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Total comprehensive income (loss) for the year                                  |  |                                                            | (10,600 | ) |      |  | (113,453 | )    |  |  | (229,802 | ) |  |      | 135,561  |   |     |  | 32,929   |   |  |  | 5,228   |  
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Profit (loss) and total comprehensive income (loss) attributable to:            |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Owners of the Company                                                           |  |                                                            | (10,600 | ) |      |  | (113,453 | )    |  |  | (229,802 | ) |  |      | 136,310  |   |     |  | 32,969   |   |  |  | 5,234   |  
|Non-controlling interests                                                       |  |                                                            |        |   |      |  |         |      |  |  |         |   |  |      | (749     | ) |     |  | (40      | ) |  |  | (6      | )
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|                                                                                |  |                                                            | (10,600 | ) |      |  | (113,453 | )    |  |  | (229,802 | ) |  |      | 135,561  |   |     |  | 32,929   |   |  |  | 5,228   |  
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Earnings (loss) per share:                                                      |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Basic                                                                           |  |                                                            | (0.07   | ) |      |  | (0.76    | )    |  |  | (1.53    | ) |  |      | 0.74     |   |     |  | 0.13     |   |  |  | 0.02    |  
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Diluted                                                                         |  |                                                            | (0.07   | ) |      |  | (0.76    | )    |  |  | (1.53    | ) |  |      | 0.06     |   |     |  | 0.13     |   |  |  | 0.02    |  
|                                                                                |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|                                                                                |  |                                                            |         |   |      | 
|Earnings (loss) per ADS(1):                                                     |  |                                                            |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |          |   |  |  |         |  
|Basic                                                                           |  |                                                            | (0.56   | ) |      |  | (6.08    | )    |  |  | (12.24   | ) |  |      | 5.92     |   |     |  | 1.01     |   |  |  | 0.16    |  
|Diluted                                                                         |  |                                                            | (0.56   | ) |      |  | (6.08    | )    |  |  | (12.24   | ) |  |      | 0.48     |   |     |  | 1.00     |   |  |  | 0.16    |  



|(1) | Each ADS represents eight common shares.
|--- | ----------------------------------------



2



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##### Table of Contents

The following table sets forth the reconciliation of non-IFRS net profit for the year, a
non-IFRS financial measure, from loss or profit for the year, our most directly comparable financial measure presented in accordance with IFRS, for the periods indicated.



|                                                                                                                        |  |                                     |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |        |  |  |  |        | 
|----------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | ---- |  | -------- | ---- |  |  | -------- | - |  | ---- | -------- | - | --- |  | ------ |  |  |  | ------ | 
|                                                                                                                        |  | For the Fiscal Year Ended March 31, |        
|                                                                                                                        |  | 2008                                |         |   | 2009 |  |          | 2010 |  |  | 2011     |   |  | 2012 |         
|                                                                                                                        |  | RMB                                 |         |   | RMB  |  |          | RMB  |  |  | RMB      |   |  | RMB  |          |   | US$ | 
|                                                                                                                        |  | (in thousands)                      |        
|Non-IFRS Financial Data                                                                                                 |  |                                     |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |        |  |  |  |        | 
|IFRS Profit (loss) for the period                                                                                       |  |                                     | (10,600 | ) |      |  | (113,453 | )    |  |  | (229,802 | ) |  |      | 135,561  |   |     |  | 32,929 |  |  |  | 5,228  | 
|Share-based compensation charges                                                                                        |  |                                     | 8,964   |   |      |  | 5,421    |      |  |  | 3,606    |   |  |      | 50,290   |   |     |  | 45,683 |  |  |  | 7,254  | 
|Initial public offering expenses charged into current expenses                                                          |  |                                     |        |   |      |  |         |      |  |  |         |   |  |      | 3,659    |   |     |  |       |  |  |  |       | 
|Loss (gain) on changes in fair value of warrants                                                                        |  |                                     | 239     |   |      |  | 18,423   |      |  |  | 7,548    |   |  |      | (7,377   | ) |     |  |       |  |  |  |       | 
|Loss (gain) on changes in fair value of convertible redeemable preferred shares                                         |  |                                     | 4,156   |   |      |  | 134,616  |      |  |  | 290,135  |   |  |      | (106,684 | ) |     |  |       |  |  |  |       | 
|Loss on modification of convertible redeemable preferred shares                                                         |  |                                     |        |   |      |  |         |      |  |  | 44,439   |   |  |      |         |   |     |  |       |  |  |  |       | 
|Foreign exchange gain relating to gain on changes in fair value of convertible redeemable preferred shares and
warrants |  |                                     | (1,943  | ) |      |  | (755     | )    |  |  | (256     | ) |  |      | (12,240  | ) |     |  |       |  |  |  |       | 
|Reversal of withholding tax on shareholding dividend(1)                                                                 |  |                                     |        |   |      |  |         |      |  |  |         |   |  |      | (8,305   | ) |     |  |       |  |  |  |       | 
|                                                                                                                        |  |                                     |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |        |  |  |  |        | 
|                                                                                                                        |  |                                     |         |   |      | 
|Non-IFRS net profit for the period(2)                                                                                   |  |                                     | 816     |   |      |  | 44,252   |      |  |  | 115,670  |   |  |      | 54,904   |   |     |  | 78,612 |  |  |  | 12,482 | 
|                                                                                                                        |  |                                     |         |   |      |  |          |      |  |  |          |   |  |      |          |   |     |  |        |  |  |  |        | 



|(1) | Reversal of withholding tax on shareholding dividend represents the reversal of the accrued withholding tax related to the dividend to preferred shareholders.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | We define non-IFRS net profit for the period, a non-IFRS financial measure, as profit (loss) for the period excluding share-based compensation charges, loss from
initial public offering expenses charged into current expenses, loss (gain) on changes in the fair value of convertible redeemable preferred shares and warrants, loss on the modification of convertible redeemable preferred shares and the foreign
exchange gain relating thereto, and the reversal of withholding tax on shareholding dividends. We review non-IFRS net profit for the period together with profit (loss) for the period to obtain a better understanding of our operating performance. We
also believe it is useful supplemental information for investors and analysts to assess our operating performance without the effect of non-cash share-based compensation charges, loss from initial public offering expenses charged into current
expenses, loss (gain) on changes in the fair value of convertible redeemable preferred shares and warrants, loss on the modification of convertible redeemable preferred shares and the foreign exchange gain relating thereto, and the reversal of
withholding tax on shareholding dividends. However, the use of non-IFRS net profit for the period has material limitations as an analytical tool. One of the limitations of using non-IFRS net profit for the period is that it does not include all
items that affect our profit (loss) for the period. In addition, because non-IFRS net profit for the period is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies.
In light of the foregoing limitations, you should not consider non-IFRS net profit for the period in isolation from or as an alternative to total profit (loss) or other financial measures prepared in accordance with IFRS.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                             |  |                                     |        |   |      |  |          |      |  |  |          |   |  |      |         |  |     |  |         |  |  |  |         | 
|-------------------------------------------- |  | ----------------------------------- | ------ | - | ---- |  | -------- | ---- |  |  | -------- | - |  | ---- | ------- |  | --- |  | ------- |  |  |  | ------- | 
|                                             |  | For the Fiscal Year Ended March 31, |       
|                                             |  | 2008                                |        |   | 2009 |  |          | 2010 |  |  | 2011     |   |  | 2012 |        
|                                             |  | RMB                                 |        |   | RMB  |  |          | RMB  |  |  | RMB      |   |  | RMB  |         |  | US$ | 
|                                             |  | (in thousands)                      |       
|Consolidated Statement of Financial Position |  |                                     |        |   |      |  |          |      |  |  |          |   |  |      |         |  |     |  |         |  |  |  |         | 
|Cash and cash equivalents                    |  |                                     | 23,825 |   |      |  | 27,618   |      |  |  | 75,105   |   |  |      | 367,214 |  |     |  | 137,538 |  |  |  | 21,840  | 
|Term deposits                                |  |                                     |       |   |      |  | 15,000   |      |  |  | 50,000   |   |  |      | 152,718 |  |     |  | 438,393 |  |  |  | 69,614  | 
|Total assets                                 |  |                                     | 30,419 |   |      |  | 102,324  |      |  |  | 292,491  |   |  |      | 656,543 |  |     |  | 718,751 |  |  |  | 114,133 | 
|Convertible redeemable preferred shares      |  |                                     | 27,690 |   |      |  | 161,584  |      |  |  | 451,491  |   |  |      |        |  |     |  |        |  |  |  |        | 
|Total liabilities                            |  |                                     | 31,892 |   |      |  | 211,829  |      |  |  | 600,003  |   |  |      | 155,003 |  |     |  | 138,516 |  |  |  | 21,995  | 
|Total equity (deficit)                       |  |                                     | (1,473 | ) |      |  | (109,505 | )    |  |  | (307,512 | ) |  |      | 501,540 |  |     |  | 580,235 |  |  |  | 92,138  | 
|Total equity and liabilities                 |  |                                     | 30,419 |   |      |  | 102,324  |      |  |  | 292,491  |   |  |      | 656,543 |  |     |  | 718,751 |  |  |  | 114,133 | 
|Share capital                                |  |                                     | 57     |   |      |  | 57       |      |  |  | 57       |   |  |      | 92      |  |     |  | 92      |  |  |  | 15      | 
|Dividends                                    |  |                                     |       |   |      |  |         |      |  |  | 16,250   |   |  |      | 13,000  |  |     |  |        |  |  |  |        | 
|Basic earnings (loss) per share              |  |                                     | (0.07  | ) |      |  | (0.76    | )    |  |  | (1.53    | ) |  |      | 0.74    |  |     |  | 0.13    |  |  |  | 0.02    | 
|Diluted earnings (loss) per share            |  |                                     | (0.07  | ) |      |  | (0.76    | )    |  |  | (1.53    | ) |  |      | 0.06    |  |     |  | 0.13    |  |  |  | 0.02    | 



3



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Exchange Rate Information

Our business is primarily conducted in China and almost all of our revenues are denominated in RMB. This annual report contains translations of RMB amounts into U.S. dollars based on the noon buying rate
on March 30, 2012, as set forth in H.10 statistical release of the Federal Reserve Board. For your convenience, this annual report contains translations of some RMB or U.S. dollar amounts for the fiscal year ended March 31, 2012 at
US$1.00: RMB6.2975, which was the noon buying rate in effect as of March 30, 2012. The prevailing rate on June 22, 2012 was US$1.00: RMB6.3644. We make no representation that any RMB or U.S. dollar amounts could have been, or could be,
converted into U.S. dollars or RMB, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into
foreign currency and through restrictions on foreign exchange activities.

The following table sets forth information
concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the
preparation of our other periodic reports or any other information to be provided to you. The source of these rates is H.10 statistical release of the Federal Reserve Board.



|                                 |  |                  |        |  |            |  |        |     |  |  |        |  |  |  |        | 
|-------------------------------- |  | ---------------- | ------ |  | ---------- |  | ------ | --- |  |  | ------ |  |  |  | ------ | 
|                                 |  | Noon Buying Rate |       
|Period                           |  | Period End       |        |  | Average(1) |  |        | Low |  |  | High   | 
|                                 |  |                  |        | 
|Fiscal Year ended March 31, 2008 |  |                  | 7.0120 |  |            |  | 7.4197 |     |  |  | 7.7345 |  |  |  | 7.0105 | 
|Fiscal Year ended March 31, 2009 |  |                  | 6.8329 |  |            |  | 6.8532 |     |  |  | 7.0185 |  |  |  | 6.7800 | 
|Fiscal Year ended March 31, 2010 |  |                  | 6.8258 |  |            |  | 6.8268 |     |  |  | 6.8371 |  |  |  | 6.8176 | 
|Fiscal Year ended March 31, 2011 |  |                  | 6.5483 |  |            |  | 6.6972 |     |  |  | 6.8323 |  |  |  | 6.5483 | 
|Fiscal Year ended March 31, 2012 |  |                  | 6.2975 |  |            |  | 6.3980 |     |  |  | 6.5477 |  |  |  | 6.2935 | 
|2011                             |  |                  |        |  |            |  |        |     |  |  |        |  |  |  |        | 
|December                         |  |                  | 6.2939 |  |            |  | 6.3482 |     |  |  | 6.3733 |  |  |  | 6.2939 | 
|2012                             |  |                  |        |  |            |  |        |     |  |  |        |  |  |  |        | 
|January                          |  |                  | 6.3310 |  |            |  | 6.3122 |     |  |  | 6.3330 |  |  |  | 6.2940 | 
|February                         |  |                  | 6.2935 |  |            |  | 6.2997 |     |  |  | 6.3120 |  |  |  | 6.2935 | 
|March                            |  |                  | 6.2975 |  |            |  | 6.3125 |     |  |  | 6.3315 |  |  |  | 6.2975 | 
|April                            |  |                  | 6.2790 |  |            |  | 6.3043 |     |  |  | 6.3150 |  |  |  | 6.2790 | 
|May                              |  |                  | 6.3684 |  |            |  | 6.3242 |     |  |  | 6.3684 |  |  |  | 6.3052 | 
|June (through June 22, 2012)     |  |                  | 6.3644 |  |            |  | 6.3648 |     |  |  | 6.3703 |  |  |  | 6.3539 | 



|(1) | Annual averages were calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by
using the average of the daily rates during the relevant month.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | B. | Capitalization and Indebtedness
| | -- | -------------------------------

Not Applicable.



| | C. | Reasons for the Offer and Use of Proceeds
| | -- | -----------------------------------------

Not Applicable.



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| | D. | Risk Factors
| | -- | ------------

Risks Related to Our
Business and Our Industry

We have a limited operating history and the long-term potential of our business model is unproven, which makes
it difficult to evaluate our business.

We commenced our business in 2005 and launched Maopao for feature phones and
smart phones in December 2006 and May 2012, respectively. As such, we have a limited operating history for you to evaluate our business, financial performance and prospects. Our business model is relatively new in China. We may not be able to
maintain our past results or growth in future periods. Our business model may become obsolete due to the development of other business models or technologies, such as mobile browser technologies. It is also difficult to evaluate our prospects
because we may not have sufficient experience to address the risks frequently encountered by early stage companies entering new and rapidly evolving markets, such as the mobile application store market.

We incurred a loss for the fiscal year ended March 31, 2010, and generated net profit in the fiscal years ended March 31, 2011
and 2012. Our ability to maintain profitability depends on, among other factors, the growth of the mobile applications industry, the continued acceptance of Maopao and the applications and content available on Maopao by our users, our ability to
provide new applications and other content to meet the demands of our users, our ability to maintain good relationships with industry participants and our ability to control our costs and expenses. We may not be able to sustain profitability on a
quarterly or annual basis. Accordingly, you should not rely on our results of operations for any prior periods as an indication of our future performance.

Significant changes in the policies, guidelines or practices of mobile network operators with respect to mobile applications and other content may result in lower revenues or additional costs for us
and materially adversely affect our business operations, financial condition and results of operations.

PRC mobile
network operators may issue new policies or guidelines or change business practices that affect mobile service providers and companies using their networks. Because we rely on mobile service providers, who in turn rely on their relationships with
mobile network operators, and our direct cooperative relationship with a certain mobile network operator, a significant change in mobile network operators policies or guidelines may cause our revenues to decrease or operating costs to
increase. Furthermore, mobile service providers and our company are subject to review by mobile network operators from time to time and may lose access to certain mobile network operators billing channels. Our financial condition and results
of operations may be materially adversely affected by policy or guideline changes by PRC mobile network operators.

For
example, in November 2009, China Mobile implemented a series of measures targeted at eliminating offensive or unauthorized content, including pornographic content, on PRC-based WAP sites. As a result, China Mobile and other PRC mobile network
operators suspended billing for their users for all WAP and G+ mobile gaming platform services, including services that do not contain offensive or unauthorized content, on behalf of third-party mobile service providers of such services. In January
2010, China Mobile began implementing a series of additional measures targeted at improving the user experience for mobile handset embedded services. Under these measures, mobile applications and other content that are embedded in handsets are
required to contain additional notices and confirmations to users during the purchase of such mobile applications and content.

In addition, services based on SMS short codes are required to be more tailored to the specific mobile applications and content
offerings or service providers. Such measures make it more burdensome for users to purchase applications and content through our application store. As a result, some users have purchased fewer applications and less content through Maopao or even
ceased purchasing through Maopao entirely. Furthermore, since September 2010, China Mobile has applied a set of new measures that require users to send triple confirmation SMSs before a transaction can be effected. When more SMSs need to be
transmitted to effect the same volume of transactions, we face more billing and transmission failures. The foregoing developments adversely affected our revenues.

In the third and fourth quarters of 2010, users of one mobile network operator who wanted to download applications or play games had difficulty accessing our servers hosted by a competing
telecommunication network operator, which adversely affected our revenues in those periods. We moved our servers to a new hosting company in December 2010 to resolve this issue. Since then we have not experienced the same problems. However, a
similar problem could occur in the future, which could materially reduce our revenues. Partly due to the triple-confirmation-SMS measures adopted by China Mobile, our revenue growth has been declining since September 2010. If the government or
mobile network operators impose similar or more stringent measures, our results of operations may be materially adversely affected.



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PRC mobile network operators or the PRC government could introduce additional requirements
with respect to the procedures for ordering monthly subscriptions or single-transaction downloads of applications and other content offered through Maopao, notifications to users, the billing of users or other consumer-protection measures or adopt
other policies that may require significant changes in the way we promote and sell the applications and content on Maopao, any of which could materially adversely affect our financial condition and results of operations.

Our failure to maintain cooperative relationships with handset companies to pre-install our application store onto mobile handsets or to cooperate
with additional handset companies would decrease in our market share.

We rely on handset companies to pre-install
our mobile application store onto their mobile phones, which is the primary way we have developed our large user base. We had entered into cooperation agreements with over 860 handset companies as of March 31, 2012 to pre-install Maopao on
their products. Our agreements with handset companies are generally for two year terms and usually contain automatic renewal provisions.

Due to our reliance on handset companies to pre-install Maopao, any loss of or deterioration in our existing relationships with handset companies, or our failure to cooperate with additional handset
companies, particularly those with a substantial market share or growth potential, would decrease the number of our users and our market share. In addition, our handset company partners face fierce competition in an industry characterized by
evolving technological standards. If our partners lose their market share, our revenues would decrease. Furthermore, the amount paid to handset companies under sales proceeds sharing arrangements have constituted a significant portion of our total
cost of revenues in recent years. Unfavorable changes to our sharing arrangements with handset companies could adversely affect our results of operations.

Handset companies often pre-install other mobile application stores in addition to Maopao, which could adversely affect purchases of applications and content on Maopao, decreasing our revenues. In
addition, certain handset companies may consider entering the mobile application store market, adversely affecting our relationships with such handset companies.

Our failure to increase the installed base of Maopao among feature phones would adversely affect our market share and results of operations.

Maopao is pre-installed primarily on feature phones. Our ability to increase the installed base of Maopao depends on many factors, some
of which are outside our control. Overall, China handset sales have experienced high growth in the past, but this trend may change. Feature phones may no longer account for a majority of the handsets in China. Chinas handset market is rapidly
evolving, and new entrants in this market often emerge. Sales of handsets, particularly feature phones, are affected by changing consumer tastes, market trends and other factors. Therefore, handset companies and design houses occupying leading
market positions in one year may lose a substantial portion of their market share the next year.

Although we work with
feature phone handset companies holding a large aggregate market share in China, these handset companies may not maintain their market share. In addition, mobile carrier-subsidized handsets, most of which have other mobile application stores
pre-installed, historically have had a relatively large market share in China, and their market share in China is growing due to increasing customer acceptance, which may adversely affect our ability to pre-install Maopao onto handsets, particularly
feature phones. Our failure to increase the installed base of Maopao among feature phones would adversely affect our market share and results of operations.

We may face increased competition, which could reduce our market share and materially adversely affect our results of operations.

The mobile application store market in China is highly competitive. The market is characterized by the frequent introduction of new
products and services, short product life cycles, evolving industry standards, improved performance characteristics, rapid adoption of technological and product advancement, and price sensitivity on the part of users. We compete directly with:



| |  |  | other independent application store operators that offer mobile application stores similar to ours, such as NetDragon Websoft Inc., Shenzhen Shenxunhe
Technology Co., Ltd., Shanghai Snowfish Tech. Co., Ltd. and Shanghai Coolbar Co., Ltd.;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | handset companies that have developed their own proprietary application stores, such as iTunes App Store on iPhones and other mobile devices from Apple
Inc. or the Ovi Store on Nokia handsets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | mobile software providers, such as Guangzhou Ucfly Company, which has developed UCWeb, a mobile handset browser;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | emerging mobile operating systems which have their own application stores, such as Android or Windows Phone;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | mobile network operators that provide their own application stores, such as Monternet Mobile Market from China Mobile and the UNI-Info Platform from
China Unicom; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | large Chinese Internet companies that may develop and operate their own mobile application stores, such as Qihoo 360, Alibaba, Tencent and Baidu.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

We may also face alliances between our existing and new competitors and new competitors may emerge. For
example, mobile service providers, handset companies or other parties may introduce a mobile application store or other business model to compete with us. In addition, some wireless communication chip manufacturers have launched or plan to launch
their own application stores. With more industry entrants, aggressive price cutting by competitors may reduce our gross margins.

Some of our competitors have significantly greater financial, technological and marketing resources, stronger relationships with industry participants and a larger portfolio of content offerings than we
do. Some of our competitors, especially major foreign mobile application store providers, have greater development experience and resources than we have. If new competitors enter the market or competition among existing competitors intensifies, we
may have to provide more favorable revenue sharing arrangements to industry participants working with us, which could adversely affect our profitability. If we fail to compete effectively, our market share would decrease and our results of
operations would suffer.

We depend on mobile service providers, and ultimately mobile network operators, for the collection of a
substantial majority of our revenues, and any loss of or deterioration in our relationships with mobile service providers, or a disruption in our mobile service providers relationships with mobile network operators, may result in severe
disruptions to our operations and loss of revenues.

For the three fiscal years ended March 31, 2012, we
collected a substantial majority of our revenues through mobile service providers, who utilize mobile network operators billing channels pursuant to their agreements with mobile network operators. As of March 31, 2012, we had entered into
agreements with over 90 mobile service providers, such as Tom.com, Kongzhong and Sina. Our agreements with mobile service providers are generally for one to three year terms and many include automatic renewal provisions. We usually renew these
agreements or enter into new ones when the prior agreements expire, but, on occasion, the renewals or new contracts can be delayed for periods of one month or more.

We rely primarily on mobile service providers for collection of sales proceeds from users and they in turn depend on mobile network operators to provide billing and collection services. Three mobile
network operators, namely China Mobile, China Unicom and China Telecom, dominate the wireless telecommunications sector in China. As China Mobile has the largest subscriber base in China, we have collected a significant majority of our sales
proceeds through China Mobile. Because these large mobile network operators, particularly China Mobile, hold a dominant position in Chinas mobile market, mobile service providers face significant risks with respect to their arrangements with
mobile network operators, and which could affect our business and results of operations.



7



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For example, since late 2009, these mobile network operators have increased their
monitoring of inappropriate mobile content and activities through quality control procedures on services provided by mobile service providers. They unilaterally terminated services provided by some mobile service providers due to these mobile
service providers alleged provision of inappropriate content in violation of regulatory requirements or due to their charging users service fees without consent.

Although we may switch to another mobile service provider if a service providers payment channel becomes unavailable or its collection performance deteriorates, such a change could result in delays
and lower revenues. In addition, because we rely on mobile service providers to collect sales proceeds from our users, any loss of or deterioration in our relationships with mobile service providers or a disruption in our mobile service
providers relationships with mobile network operators may severely disrupt our operations, decrease revenues, potential credit risk of our trade receivables and materialy adversely affect our financial condition and results of operations.

If we fail to maintain cooperative relationships with mobile network operators, our revenues and growth prospects may be adversely
affected.

In late 2011, we began to cooperate with China Mobile to enhance our market presence. We have entered
into a promotion agreement with China Mobile pursuant to which China Mobiles reading application software became available as a downloadable application via Maopaos browser, the Maopao application store and technical plug-ins to our
Maopao Community. In addition, we have entered into a partnership agreement with China Mobile. Pursuant to the partnership agreement, we provide certain content and applications on China Mobiles gaming platform and China Mobile
provides billing and collection services to us. Both agreements have a one-year term and contain automatic renewal provisions. For fiscal 2012, our relationship with China Mobile accounted for approximately 1.7% of our revenues.

We plan to strengthen our cooperation with China Mobile and expect to establish similar cooperative relationships with other mobile
network operators. However, we may not be able to establish such cooperative relationships with other mobile network operators. If we fail to maintain such relationships, we may not be able to find appropriate replacement operators and our business
and prospects may be adversely affected. Furthermore, mobile network operators monitor our operations and if we fail to comply with their policies or guidelines, they may impose sanctions, including denying us access to their billing channels,
adversely affecting our financial condition and results of operations.

We depend on the billing and collection systems of mobile
network operators and mobile service providers. The inaccuracy of these systems or deterioration in the financial condition of mobile network operators and mobile service providers could affect our business and results of operations.

We depend indirectly on mobile network operators to maintain accurate records of payments by users and collect such
payments. Our mobile service providers typically receive periodic statements from mobile network operators confirming the value of our mobile applications and content that the mobile network operators billed to users. We in turn receive periodic
statements from mobile service providers, which indicate the aggregate amount of fees charged to users for purchases of applications and content through Maopao. While we conduct independent sampling tests to verify information provided to us, our
sampling is on a relatively small scale compared to total transaction volume and the inaccuracies found are usually resolved through negotiations with mobile service providers. Our business and results of operations could be adversely affected if
the mobile network operators or mobile service providers miscalculate the revenues generated from the sales of our mobile applications and content.

We generally offer our mobile service providers credit terms ranging from 60 to 90 days. Receivables from our top ten mobile service providers accounted for approximately 65.4% and 68.5% of our total
trade receivables as of March 31, 2011 and March 31, 2012, respectively. Failure to timely collect our receivables from mobile service providers may adversely affect our cash flows. Our mobile service providers may from time to time
experience cash flow difficulties. Consequently, they may delay their payments to us. Any inability of mobile service providers to pay us may adversely affect our earnings and cash flow.

Our revenues and cost of revenues are affected by billing and transmission failures that are often beyond our control. Failure to implement a new system to correctly record billing and transmission
failures in a timely manner could harm the credibility of our system and our relationships with industry participants.

After a mobile user confirms a purchase of mobile applications or other content, the mobile service provider will send the user a
confirmation SMS with transaction details and send a simultaneous message to the mobile network operator, which we refer to as a message original, or MO. We also record such transactions on Maopao. Upon receiving the MO data, the mobile network
operator will verify the execution of a transaction. If the transaction has been effected, the mobile network operator usually will receive, from the users mobile phone, a confirmation message, which we refer to as a message received, or MR.
Based on MR data, mobile network operators record the transactions and bill the user.



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The MR data are usually lower than the MO data for various reasons, including:



| |  |  | the mobile network operator experiences technical problems with its network that prevent the transmission of MR data;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | the delivery of mobile applications and content through Maopao to a user is prevented because the users phone is turned off for an extended
period of time, or the users prepaid phone card has run out of value; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we experience technical problems with Maopao that prevents the delivery of our applications and content.
| | - |  | --------------------------------------------------------------------------------------------------------

These situations are known in the industry as billing and transmission failures. In the fiscal year ended March 31, 2012, the
monthly MR amounts we received from mobile network operators were approximately 10% to 20% lower than the monthly MO amounts recorded on Maopao.

We recognize our revenues based on MR data. In line with industry practice, we make payments to content providers and handset companies based on our MO data rather than MR data, because MR data generally
does not contain sufficient information to enable us to identify which application or content title is purchased through which handset model. Consequently, share of sales proceeds based on MO data may not accurately reflect content providers
and handset companies contribution to transactions. Recognizing the difference between MO and MR data, we apply discount ratios to our MO data to account for billing and transmission failures.

Policy changes by PRC government authorities and mobile network operators may augment billing and transmission failures. Due to a change
in China Mobiles practices, since January 2010 we have not been able to match the data of an individual download with a particular content and handset model. Since that time, we have calculated the sales proceeds payable to individual content
providers and handset companies based on the number of application and content downloads recorded by our servers attributable to the relevant content and handset models as a percentage of the aggregate number of downloads recorded by our servers
during the relevant periods. Our relationship with a content provider or a handset company may suffer if that company believes that the amount we have paid for its products or services since China Mobiles practice change in January 2010 did
not accurately reflect the amount it is entitled to receive pursuant to the terms of its contract.

In August 2010, we
implemented a new system that provides a more reliable estimate matching the MO data provided by the mobile service providers and mobile network operators with individual user transactions recorded by our transaction clearing system. However, if we
fail to verify the accuracy of data provided by this system in a timely manner, we may not be able to accurately reward third-party content providers and handset companies, which could harm the credibility of our system and adversely affect our
relationships with them.

We focus on the feature phone market and are new entrants to the smart phone market. Failure to capture
opportunities in the expected growth of the smart phone market could materially adversely affect our prospects.

We
primarily work with handset companies designing and manufacturing feature phones, which currently have a larger market share in China than smart phones. Smart phones are already popular in developed countries and are gaining popularity in China,
which challenges feature phones dominant market position in the Chinese handset market. Smart phones are technologically advanced devices with personal computer-level versatility that operate advanced operating systems such as Android,
Apples iOS, BlackBerry OS, Linux, Symbian and Windows Phone. Smart phones are becoming more affordable in China because of PRC government-subsidized programs.

Smart phones are usually characterized by more powerful processors, larger screens and higher data storage capacity than feature phones, and are able to easily install and run high performance multimedia
applications. We have designed versions of our Maopao application store which can be downloaded over the air to smart phones with operating systems such as Symbian and Android. However, downloading and installing these customized versions is not as
convenient to users as accessing Maopao pre-installed on their handsets. As smart phones gain market share in China and around the world, some of our users may migrate to smart phones, which can operate applications with better functionalities than
feature phones.



9



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##### Table of Contents

As smart phones increase market share in China, some of our users may migrate to smart
phones, which can operate applications with better functionalities than feature phones. Primarily as a result of the declining share of the feature phone market in China, our application store revenues in fiscal 2012 decreased by 8.8% compared
to fiscal 2011. If the feature phone market continues to decline, and we fail to capture the opportunities in the growing smart phone market, our results of operations and financial position could be materially adversely affected.

If our smart phone series of products do not achieve wide market acceptance or if we fail to generate profits with respect to such products, our
results of operations may be adversely affected.

In May 2012, we launched a new version of our Maopao application
store for smart phones, in particular Android-based smart phones, which we believe will be one of the major smart phone operating systems in China. We are new entrants to the smart phone market, a fast-growing market with different characteristics
than the feature phone market. For example, the smart phone market employs open-source technologies by which our users can freely download our applications through alternative sources and without accessing our application store.

We cannot assure you that we can keep up with the technical developments of the smart phone market or that we can successfully establish
relationships with smart phone companies and increase or maintain the volume or market share of mobile handsets with Maopao pre-installed. In addition, many smart phone companies have developed their own application stores. Even if Maopao is
installed on smart phones, we will compete with the application stores operated by these smart phone companies and smart phone users may not use the applications and content on Maopao at the same level as they use feature phones.

As community-based applications and other content offered through Maopao are expected to account for an increasing portion of our future revenues,
any adverse developments relating to such content may adversely affect our results of operations.

We anticipate that
community-based applications with social network functions, such as mobile social games, will generate an increasing percentage of our revenues in the foreseeable future. However, we began operating pilot mobile social games in 2008 and have limited
experience in this area. In addition, community-based applications require a substantial number of users to reach critical mass and may result in the concentration of users in certain applications or titles. For example, in the fiscal year ended
March 31, 2012, we estimate that Fantasy of the Three Kingdoms accounted for a substantial majority of our Maopao Community revenues through K Currency, the primary form of payment allowed for purchases in the Maopao Community. We are also
enhancing our efforts in marketing mobile applications and content with social network functions, though our experience in that field is limited. Accordingly, any of the following could materially adversely affect our business, financial condition
and results of operations:



| |  |  | any reduction in or failure to grow the user base of our community-based applications and other content provided through Maopao;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | any decrease in the popularity of our community-based applications and content or any decrease in their purchases due to intensifying competition or
other factors;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | failure by us or third-party content providers to make quality upgrades, enhancements or improvements to these applications and content in a timely
manner in response to user preferences;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | failure by us or third-party content providers to develop and launch new community-based applications and content appealing to users;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our failure to efficiently operate community-based applications and content and provide effective customer service;
| | - |  | -------------------------------------------------------------------------------------------------------------------



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| |  |  | our failure to comply with regulatory requirements with respect to these applications and content; or
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | any breach of related software security, prolonged server interruption due to network failures, hacking activities or other factors or any other
adverse developments relating to these applications and content.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Laws and regulations regulating mobile social games
in China are developing and may change. If we fail to obtain or maintain all applicable permits and approvals, our business and results of operations would be materially adversely affected.

Operating mobile social games in China requires a series of permits and approvals. For example, we have obtained a license from the
Ministry of Culture with respect to the operation of mobile social games. In addition, the Internet publication of mobile social games requires pre-approval from the General Administration of Press and Publication, or GAPP. We operate a substantial
majority of our mobile social games in collaboration with third parties such as content providers, and such third parties are in charge of obtaining the approvals from GAPP.

For the remaining mobile social games we operate, we are responsible for obtaining approvals from GAPP. Because the requirement for GAPP approval of mobile social games was imposed in late 2009 and the
approval process is lengthy, GAPP has not yet approved any mobile social games that we operate. With respect to the games that we operate alone, we have not submitted applications for GAPP approval as we are first required to obtain an online
publication license from GAPP. We have started the process of obtaining such a license. We cannot assure you that we can obtain an online publication license in a timely manner or at all.

With respect to the games that we operate in collaboration with third parties, third parties have submitted applications for GAPP
approval for some of the games. We have requested other third parties to submit applications to GAPP for approval of the other games as soon as possible. In case we or such third parties cannot obtain GAPP approval, we may be subject to various
penalties, including fines and discontinuation of operation of the relevant games. As mobile social games are at an early stage of development in China, new laws and regulations may require additional licenses and permits. As a result, substantial
uncertainties exist regarding the interpretation and implementation of PRC laws and regulations applicable to the operation of mobile social games. We cannot assure you that we will be able to timely obtain required licenses or any other new license
required, and we may be found in violation of PRC laws and regulations.

The PRC government has introduced measures aimed at regulating
online games, the provision of virtual currency and other related content. If we are deemed to have violated any of the rules and regulations, we may be subject to penalties and our results of operations may be materially adversely affected.

On June 3, 2010, the PRC Ministry of Culture, or the MOC, issued the Tentative Rule on Administration of Online
Games, or the Rule on Online Games, effective as of August 1, 2010. According to the Rule on Online Games, companies which plan to engage in the operation of online games, issue virtual currency and provide virtual currency transaction services
must obtain a license from the provincial counterpart of the MOC. This rule also regulates content review and other aspects of the operation of online games as well as virtual currency transaction services. See Item 4. Information on the
Company  B. Business Overview  Regulations.

In addition, the Notice on the Reinforcement of the
Administration of Internet Cafés and Online Games, or the Internet Cafés Notice, issued by the MOC in February 2007, directs the Peoples Bank of China, or PBOC, to strengthen the administration of virtual currency in online games
to avoid any adverse impact on the PRC economy and financial system. This notice provides that the total amount of virtual currency issued by online game operators and the amount purchased by individual game players should be strictly limited, with
a strict and clear division between virtual transactions and real transactions carried out through electronic commerce. This notice also provides that virtual currency should only be used to purchase in-game items.

Our mobile games, including both single-player games and mobile social games, may be subject to government approval before placement on
Maopao. All of our revenues from mobile social games are collected through the sale of our virtual currency, the K Currency. Our item-based revenue model may cause additional concerns with PRC regulators who have been implementing regulations
intended to limit the total amount of virtual currency issued by online game operators and the amount purchased by an individual game player. The restrictions imposed by the above rules may result in lower sales of our virtual currency, and could
adversely affect our game revenues. If our operations or the applications and content on Maopao are deemed to have violated any of these rules and regulations, we may be subject to penalties and our results of operations may be materially adversely
affected.



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We may not be successful in effectively promoting or developing our brand.

Enhancing the awareness of our Maopao brand among users and establishing it as a consumer brand with high recognition forms
an integral part of our growth strategy. We believe our future success depends on, among other things, market recognition and acceptance of our Maopao brand. We lack experience in promoting or developing our brand among users. To
effectively promote our brand, we must build and maintain our brand image by focusing on a variety of promotional and marketing activities to promote brand awareness. We may not be able to effectively promote or develop our brands and if we fail to
do so our growth may be adversely affected.

In addition, negative publicity or disputes regarding our brand, offerings,
company or management could materially adversely affect public perception of our brand. Many of the factors that affect our brand may be outside our control. Industry participants, including handset companies and content providers working with us
could taint our brand because of concerns over the quality of their products and services. Any impact on our ability to effectively promote our brand or any significant damage to our brands image could materially adversely affect our sales,
profits and prospects.

Our ability to generate revenues could suffer if the PRC market for mobile application stores and advanced
applications and content does not develop as anticipated.

The mobile application store market in China has evolved
rapidly in recent years, with the introduction of new business models, changing user preferences, new service and product offerings, new competitors and evolving strategies by existing competitors. We expect these trends to continue, and we must
adapt our strategy to successfully compete in our market.

In particular, we are focused on operating a mobile application
store that provides a wide range of applications and other content for feature phone handsets using 2G and 2.5G technologies by cooperating with industry participants, including content providers, mobile service providers and handset companies.
However, mobile phone users and industry participants may not accept or promote our technologies, business model and offerings. In addition, numerous other technologies and business models in varying stages of development, such as mobile tablets,
netbooks and other mobile Internet devices involving fourth generation mobile technologies, could render certain current technologies or applications obsolete.

Accordingly, it is difficult to predict user demand for offerings, and the future size, composition and growth of this market. Furthermore, given the limited history and rapidly evolving nature of our
market, we cannot predict the price that users will be willing to pay for offerings provided through our mobile application store or whether users will have concerns over security, reliability, cost and quality of service associated with our
offerings. If acceptance of our mobile application store is different than anticipated, our ability to maintain or increase our revenues and profits could be materially adversely affected.

Regulation and censorship of information disseminated over the Internet and wireless telecommunication networks in China may adversely affect our business, and we may be liable for information
displayed on, retrieved from or linked to our Maopao application store.

China has enacted regulations governing
telecommunication mobile service providers, Internet and wireless access and the distribution of news and other information over the Internet and wireless telecommunication networks. Under these regulations, Internet content providers and Internet
publishers, such as our company, are prohibited from posting or displaying over the Internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs the national dignity of China, or is obscene,
superstitious, fraudulent or defamatory. When Internet content providers and Internet publishers find that information falling within the categories above is transmitted on their websites or platforms, they must terminate the transmission or delete
such information immediately, maintain records of the violations and report the violations to the authorities.

Failure to
comply with these requirements could result in the revocation of required licenses and the closure of the websites or platforms involved. The website or platform operator may also be held liable for such prohibited information displayed on,
retrieved from or linked to such website or platform. Mobile network operators like China Mobile also have their own policies prohibiting or restricting the distribution of inappropriate content. Since December 2009, the Chinese government has been
increasing its efforts to crack down on inappropriate content disseminated over the Internet and wireless networks.



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On December 15, 2009, the Ministry of Industry and Information Technology of the PRC,
or MIIT, issued the Notice Regarding Plan for Further Regulating Obscene Materials on Mobile Phones, or Circular 672. Under Circular 672, mobile network operators are required to examine their business and promotional channels, as well as the
business of their partners, and must immediately terminate such business if any obscene material is involved. Mobile service providers involved in distributing or publishing obscene material on mobile handsets are subject to immediate suspension or
termination of cooperation with mobile network operators, and a violation will be reported to the authorities.

Mobile
network operators and mobile service providers must examine all websites accessed through mobile handsets and conduct daily inspections of such websites. If any obscene material is found, access and transmission must cease and be reported to
authorities. On June 3, 2010, the MOC issued the Rule on Online Games, according to which companies that plan to operate online games, issue virtual currency and provide virtual currency transaction services must obtain a license from the
provincial counterpart of the MOC. The MOC is responsible for content review of online games. Online game operators are also required to establish a self-censorship mechanism and ensure the lawfulness of the content of their games and corporate
operations.

As these regulations are relatively new and subject to interpretation by the authorities, we may not be able to
determine the type of content that could result in liability as a mobile application store operator. Although we may determine that the mobile applications and content provided on Maopao comply with regulatory requirements, regulatory authorities
may hold a different view. In addition, we may not be able to control or restrict the content of other Internet content providers linked to or accessible through Maopao, despite our attempt to monitor such content. For example, many of the industry
participants with which we work, such as handset companies and content providers, have access to the technology used to develop applications for Maopao. Personnel who have access to our technology may develop malware and other inappropriate content.

Although we control the content displayed on Maopao, a distributor of malware or other inappropriate content developed in
our proprietary format could disseminate such content directly through the Internet without accessing our Maopao server and users may download such content onto their mobile handsets. To the extent that regulatory authorities find any portion of the
applications and content on Maopao objectionable, they may require us to limit or eliminate the dissemination of such information or otherwise curtail such content on Maopao, which may reduce our user traffic.

We may be subject to significant penalties for violations of regulations arising from information displayed on, retrieved from or linked
to Maopao, including a suspension or shutdown of our operations. Any violation, or perceived violation, of such regulations may subject us to claims of contractual breaches from the industry participants we work with, including mobile service
providers and handset companies. In addition, we may face suspensions or termination of our cooperative relationships with other industry participants and/or claims for monetary damages, and our financial condition and results of operations would be
materially adversely affected.

Potential problems encountered when we implement a new system to record user data may lead to user
dissatisfaction and loss of revenues, which may adversely affect our results of operations.

In August 2010, we
implemented a new system to record user data and match most MO data provided by the mobile service providers and mobile network operators with individual user transactions recorded by our transaction clearing system. The new data record system
allows us to verify the accuracy of records provided to us by mobile service providers and more accurately calculate the fees payable to industry participants such as handset companies and content providers. Since we implemented this new data record
system, however, we have determined that in approximately 5% to 8% of transactions, users may not be able to access the applications or content they chose after they confirm a purchase, which results in a failed purchase and lost revenues. We cannot
assure you that the rate of failed purchases will decrease, resulting in user dissatisfaction and loss of revenues, and adversely affecting our results of operations.



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We rely on third-party content providers for a majority of the applications and content available on
Maopao. Our failure to license or otherwise obtain applications or content that meet user demand would materially adversely affect our business.

We contract with third-party content providers to offer their mobile applications and other content through our mobile application store. A majority of our licensing arrangements with these third parties
are short-term and do not guarantee the continuation or renewal of these arrangements on reasonable terms, or at all. Most licensing arrangements, particularly those for simple applications and single-player games, have an exclusivity period of only
three to six months, if any. Some third-party content providers may offer competing mobile applications and content, and could make it more difficult or impossible for us to license their content in the future. Other content owners, providers or
distributors may seek to limit our access to, or increase the total cost of, such content.

There is no assurance that
content providers will continue to develop and maintain applications and other content for our mobile application store on a timely basis or at all. If we cannot offer a wide variety of mobile content at reasonable prices with acceptable usage
rules, our financial condition and operating results may be materially adversely affected. If content licensed to us is also available to other application store operators or other competitors because our licenses are not exclusive or the
exclusivity period has expired, the popularity of Maopao and our ability to generate profits may be adversely affected. For example, since the expiration of the three-month exclusivity period for the mobile social game Fantasy of the Three Kingdoms,
we have faced competition from other application stores that offer the same game.

Furthermore, we develop certain
applications and content available on Maopao in-house. For example, we developed our card game center in-house. Such development may negatively affect the decisions of content providers to develop, maintain and upgrade similar or competitive
applications for Maopao. If content providers focus their efforts on competing mobile application stores, the availability and quality of applications for Maopao may suffer.

If we are unable to successfully develop, license, launch and operate additional mobile applications and other attractive content that grows our user base and increases our revenues, our results of
operations will be adversely affected.

We will need to develop, license, launch and operate mobile games and other
popular content to replace our mobile games and other content as they reach the end of their useful economic lives to meet our strategy of offering content that expands our user base and increases our revenues.

We are developing applications and other content in-house as well as licensing new mobile applications and other content from third
parties. The success of our mobile application store will largely depend on our ability to anticipate and effectively respond to changing user tastes and preferences and technological advances in a timely manner. We cannot assure you that we can
identify and license from third parties appropriate mobile games and other applications and content on reasonable terms or at all, nor can we assure you that the mobile applications and other content we license or develop will be launched as
scheduled, viewed by the regulatory authorities as complying with content restrictions, attractive to users, able to compete with mobile applications and other content offered by our competitors, or commercially successful.

In addition, as we introduce content, some of our existing users may switch to new content. If this transfer of users from our existing
mobile applications and other content does not grow our overall user base and revenues, our growth and profitability may be materially adversely affected. If we are not able to develop, license or acquire mobile applications and other content that
are commercially successful and appeal to users, our future profitability and growth prospects will decline.

Our failure to anticipate
or successfully implement new technologies could render Maopao uncompetitive or obsolete and reduce our revenues and market share.

Our proprietary Maopao application store and related technologies, including standard software development kits and tool suites, are critical to our success. The mobile applications industry is changing
rapidly. We need to anticipate the emergence of new technologies and assess their market acceptance. We also need to invest significant financial resources in research and development to keep pace with technological advances in order to make our
technologies, product offerings and development capabilities competitive in the market.



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However, development activities are inherently uncertain, and we might encounter practical
difficulties in commercializing our products. Our significant expenditures on research and development may not generate corresponding benefits. Given the fast pace with which mobile application store technology has developed, we may not be able to
timely improve Maopao and related technologies in an efficient and cost-effective manner, or at all. New technologies in our industry could render the technologies and product offerings that we are developing or expect to develop obsolete or
uncompetitive, decreasing our revenues and market share.

Undetected programming errors or flaws in our mobile application store or
applications could harm our reputation or decrease market acceptance of Maopao.

Our mobile application store and
applications available through our store, such as mobile social games, which are subject to frequent improvement and update, may contain errors or flaws that may only become apparent when mobile users access the updated application store and
applications, particularly as we launch new features and updates under tight time constraints. We mostly rely on our users to inform us of programming flaws affecting their experience, and we are generally able to resolve such flaws promptly.

However, if we do not promptly resolve programming errors or flaws, we may lose users and our revenues, our reputation and
the market acceptance of Maopao may suffer. In addition, Chinese government authorities have promulgated rules and regulations targeting mobile service providers that charge for applications and other content without user consent. If a programming
error or flaw in Maopao inadvertently charges users without consent, we may be subject to administrative penalties and fines.

Failure
to maintain effective customer service could harm our reputation or decrease market acceptance of Maopao, which would materially adversely affect out results of operations.

Customer service is critical to retaining current users and attracting potential users, and we may not be able to maintain and improve
the quality of our customer service to meet mobile users expectations. If Maopao or the mobile applications and other content offered through Maopao contains errors or other flaws, or if we otherwise fail to provide effective customer service,
our users may be less inclined to use Maopao or recommend Maopao to other potential users, and may switch to our competitors mobile application stores.

Some China-based Internet companies have experienced group complaints, sometimes organized by their competitors or people attempting to profit from such complaints. If we face similar group complaints in
a short time frame, we may not be able to effectively handle customer service requests from our other users. Unsatisfactory customer service can disrupt our operations, adversely affect the user experience, harm our reputation, cause our users to
stop using Maopao and delay market acceptance of Maopao or the mobile applications and other content offered through Maopao, any of which could materially adversely affect our results of operations.

Unexpected network interruptions, data loss, security breaches, computer virus attacks or other risks relating to the operation of applications on
Maopao could materially adversely affect our business, financial condition and results of operations.

Any failure to
maintain the satisfactory performance, reliability, security and availability of applications and content available on Maopao may harm our reputation and ability to attract and maintain users. Major risks involved in these applications include,
among others, any breakdowns or system failures in our network infrastructure resulting in a prolonged shutdown of all or a material portion of our servers, including failures attributable to sustained power outages or efforts to gain unauthorized
access to our systems.

Our critical servers and backup servers are located in Hangzhou, though not in the same building. As
a result, our network systems are vulnerable to damage from natural disasters or accidents affecting the region where these servers or our other network equipment are located, such as fire, flood, power loss, telecommunications failures, computer
viruses, hacking and other similar events. Any network interruption or inadequacy that causes interruptions in the availability of our offerings or a deterioration in the quality of access to our offerings could reduce user satisfaction and our
competitiveness.



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In addition, any security breach caused by hacking, which involves efforts to gain
unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses could materially adversely affect
our business, financial condition and results of operations. We do not maintain insurance policies covering losses relating to our systems and we do not have business interruption insurance.

The growth of our business may be adversely affected due to our failure to ensure the security and privacy of confidential user information.

A significant barrier to the development of wireless businesses is the secure transmission of confidential information over the wireless
network. We have implemented an account management system for users of our community-based applications and content and plan to expand this system to all of our users. We rely on proprietary encryption and authentication technology to provide the
security and authentication necessary to effect secure transmission of confidential user information, such as user names and passwords. While we have not experienced any material breach of our security measures to date, advances in technology, new
discoveries in the field of cryptography, or other events or developments could result in a compromise or breach of the algorithms we use to protect user information.

A party who is able to circumvent these security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems caused by such breaches. Concerns over the security and privacy of user information may inhibit the wireless business generally, and our mobile application store in
particular. To the extent that our activities involve storing and transmitting proprietary information, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. There can be no assurance
that our security measures will prevent security breaches, and failure to prevent such security breaches may materially adversely affect our business, prospects, financial condition and results of operations.

We could be liable for breaches of security of payment processing agents, which may materially adversely affect our reputation and business.

In addition to collection through mobile service providers, we collect a small portion of our revenues through
payment processing agents, who help us collect sales proceeds through third-party payment channels such as the game cards of third-party companies, other prepaid cards, bank remittances, China Post and virtual money, among other methods. In
transactions utilizing third-party payment channels, secured transmission of confidential information, such as customers card numbers and expiration dates, personal information and billing addresses, over wireless networks, the Internet and/or
third-parties databases, is essential to maintain consumer confidence.

We do not control the security measures of
third-party payment channels and we cannot assure you that their security measures will be adequate in light of our expected increased usage of their payment channels. Security breaches in these payment channels could expose us to litigation and
possible liability for failure to secure customer transaction data and could harm our reputation and ability to attract users and discourage users to pay through these third-party payment channels.

Our business is increasingly subject to the risks of international operations.

International expansion forms an important component of our growth strategy. Expanding our business internationally exposes us to a
number of risks, including:



| |  |  | fluctuations in currency exchange rates;
| | - |  | ----------------------------------------



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| |  |  | our ability to select the appropriate geographical regions for international expansion;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | difficulty in identifying appropriate local content providers, handset companies, mobile service providers or joint venture partners and establishing
and maintaining good relationships with them;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | difficulty in understanding local markets and cultures;
| | - |  | -------------------------------------------------------



| |  |  | compliance with foreign laws and regulations, including import and export requirements, foreign exchange controls and cash repatriation restrictions,
data privacy requirements, labor laws and anti-competition regulations; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased costs associated with doing business in foreign jurisdictions.
| | - |  | ------------------------------------------------------------------------

Our financial condition and operating results could be significantly affected by these and other risks associated with international
activities. Although we have implemented policies and procedures designed to facilitate compliance with laws and regulations in foreign jurisdictions applicable to us, our employees, contractors or agents could violate such laws and regulations or
our policies. Any such violations could materially adversely affect our financial condition and operating results.

Our business could
suffer if we do not successfully manage our growth.

We have experienced a period of rapid growth and expansion that
has placed a strain on our management personnel, systems and resources. To accommodate our growth, we may need to implement and maintain a variety of new and improved operational and financial systems, procedures and controls, and improve our
accounting and other internal management systems, all of which require substantial management efforts.

We will also need to
expand, train, manage and motivate our workforce, and manage our relationships with our users and other industry participants, such as content providers, mobile service providers and mobile handset companies. These endeavors will require substantial
management effort and skill and additional costs. We cannot assure you that we will be able to efficiently or effectively implement our growth strategies and manage the growth of our operations, and any failure to do so may limit our growth and
hamper our business strategy.

We may not be able to adequately protect our intellectual property rights, which could harm our business
and competitive position.

Trademarks, trade secrets, copyrights and other intellectual property we use are important
to our business. We rely on a combination of trademark, copyright and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions, to protect our intellectual property and our
brand. We have invested significant resources to develop our intellectual property and acquire licenses to use and distribute the intellectual property of others for our business. Our failure to maintain or protect these rights could harm our
business. In addition, any unauthorized use of our intellectual property by third parties may adversely affect our revenues and reputation.

The validity, enforceability and scope of protection available under intellectual property laws with respect to the mobile and Internet industries in China are uncertain and still evolving. Implementation
and enforcement of PRC intellectual property laws have historically been deficient, ineffective and hampered by corruption and local protectionism. Accordingly, protection of intellectual property rights in China may not be as effective as in the
United States or other western countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend our patents or to determine the enforceability, scope
and validity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation could result in substantial costs and divert resources and management attention, which could harm our business and
competitive position.



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Our results of operations, financial performance and business may suffer from intellectual property
rights infringement claims against us.

We could face claims that we are improperly using intellectual property owned
by others or otherwise infringing their intellectual property rights. Third parties license a large portion of the content available on Maopao, including most mobile music and book titles. Although we take measures to ensure that licensors have
intellectual property rights with respect to the licensed content, we may be subject to infringement claims regarding such licensed content.

Regardless of the validity of such claims, we could incur costs defending or settling any intellectual property disputes alleging infringement. Intellectual property litigation could force us to, among
other things, stop offering certain mobile applications or content, develop non-infringing alternatives or obtain licenses from the owners of the infringed intellectual property. We may not be successful in developing alternatives or in obtaining
licenses on reasonable terms or at all, materially adversely affecting our results of operations, financial performance and business.

We substantially depend on our management and other key personnel. If we lose their services, we could incur significant costs in finding suitable
replacements and our business may be severely disrupted.

Our success heavily depends upon the continued services of
our management and other key personnel. In particular, we rely on the expertise and experience of Mr. Michael Tao Song, our chairman and chief executive officer, Mr. Li Ou, our chief technology officer, Mr. Carl Yeung, our chief
financial officer and Mr. Qing Yan, our chief operating officer. If one or more of our senior management or other key personnel were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at
all. Our business, financial condition and results of operations may suffer, and we may incur additional expenses to recruit, train and retain personnel.

In addition, Mr. Carl Yeung is a co-defendant in a securities class action filed against China Natural Gas, Inc., a Delaware corporation whose common shares were listed on the NASDAQ Global Market.
See Item 8. Financial Information  A. Consolidated Statements and Other Financial Information  Legal Proceedings. These actions and any future legal proceedings against any of our management members may divert their attention
and harm their reputation regardless of the results of litigation, and may adversely impact our business and reputation. Mr. Yeung could also be held individually liable for civil damages.

If any of our management or key personnel joins a competitor or forms a competing company, we may lose collaborators, suppliers,
know-how and key professionals and staff members. Each of our executive officers has entered into an employment agreement and certain confidentiality and non-competition clauses or agreements with us. However, if any dispute arises with our
officers, the non-competition provisions contained in their confidentiality and non-competition clauses or agreements may not be enforceable, especially in China, where most of these executive officers and key employees reside, on the grounds that
we have not provided adequate compensation to these executive officers for their non-competition obligations as required under PRC law.

We may not be successful in attracting and retaining qualified personnel.

We need to hire and retain additional qualified employees to support our operations and planned expansion. Since our industry is
characterized by high demand and intense competition for talent, we may need to offer higher compensation and other benefits in order to retain key personnel, particularly considering our location in Hangzhou, a region less attractive to some
potential employees than cities such as Beijing or Shanghai. We cannot assure you that we will be able to attract or retain the qualified key personnel that we will need to achieve our business objectives. In addition, as our business has grown
rapidly, our ability to train and integrate new employees into our operations may not meet the increasing demands of our business.

Our
principal shareholder has substantial influence over our company and its interests may not be aligned with the interests of our other holders of our common shares and ADSs.

Our principal shareholder, Xplane Ltd., a British Virgin Islands company controlled by Mr. Michael Tao Song, our chairman and chief
executive officer, and his wife, held 57.1% of our outstanding share capital as of March 31, 2012. Accordingly, Xplane Ltd. has substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all
or substantially all of our assets, the election of directors and other significant corporate actions. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an
opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. Alternatively, our principal shareholders may cause a merger, consolidation or change of control transaction even our other
shareholders oppose such a transaction.



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We have limited insurance coverage, which could expose us to significant costs and business
disruption.

Other than insurance for some of our transportation vehicles, we have not purchased any insurance to
cover our assets, property and business. If we were to incur substantial losses or liabilities due to fire, explosion, flood or a wide range of other natural disasters or accidents or business interruption, our results of operations could be
materially adversely affected.

The audit report included in this annual report was prepared by auditors who are not inspected by the
Public Company Accounting Oversight Board and, as a result, you are deprived of the benefits of such inspection

Our
independent registered public accounting firm that issued the audit report included in this annual report filed with the US Securities and Exchange Commission, as the auditors of a company that is traded publicly in the United States and a firm
registered with the US Public Company Accounting Oversight Board (United States), or the PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and
professional standards. Because our auditors are located in the Peoples Republic of China, where the PCAOB may not conduct inspections without the approval of Chinese authorities, the PCAOB has not inspected our auditors.

Inspections of other firms conducted by the PCAOB outside of China have identified deficiencies in those firms audit procedures
and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. The lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditors audits and its quality
control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

The inability of the PCAOB
to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditors audit procedures and quality control procedures compared to auditors outside of China that are subject to PCAOB inspections.
Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements due to this lack of PCAOB inspections.

If we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, adversely affecting investor
confidence and the market price of our ADSs.

As a public company in the United States, we are subject to the
Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 and related rules, or Section 404, require us to include a management report which contains managements assessment of the effectiveness of our internal
controls over financial reporting in our annual report.

Prior to our initial public offering in December 2010, we were a
private company and had limited accounting personnel and other resources with which to address our internal control over financial reporting. During the audit of our financial statements for the fiscal years ended March 31, 2010 and 2011, we
identified one material weakness and one significant deficiency in our internal control over financial reporting. The material weakness was related to design deficiencies with respect to our internal control over computer systems that could affect
the integrity of transaction data and financial information. The significant deficiency identified was related to lack of established and documented financial accounting policies and procedures.

To remedy the material weakness and significant deficiency identified, we have hired two new internal IT control managers and a new
internal control manager who have extensive experience with internal control design, implementation and review. We have also engaged a third-party accounting firm to help us with the design of internal control over computer systems and financial
accounting policies and procedures. In addition, we have organized our accounting and internal control personnel to participate in various training and seminars provided by third-party specialists on internal control, IFRS and SEC reporting
requirements updates. We believe that the implementation of these measures have addressed the material weakness and significant deficiency in our internal control over financial reporting and therefore conclude that the material weakness and
significant deficiency have been remediated as of March 31, 2012.



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Our management has concluded that our internal control over financial reporting is
effective. See Item 15. Controls and Procedures. Our independent registered public accounting firm has issued an attestation report on our managements assessment of our internal control over financial report, which concludes
that our internal control over financial reporting is effective in all material aspects.

If we fail to maintain the adequacy
of our internal control over financial reporting, we may not be able to conclude that we have effective internal control over financial reporting and our financial statements could become unreliable, which could result in material misstatements in
our financial statements. In addition, if we fail to meet our reporting obligations, investors may lose confidence in our reported financial information. Any of these events could limit our access to capital markets, harm our results of operations,
and decrease the trading price of our ADSs.

Furthermore, we have incurred and anticipate that we will continue to incur
considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

We may undertake acquisitions, investments, joint ventures or other strategic alliances, which could materially adversely affect our business. In addition, such undertakings may not be successful.

Our strategy includes plans to grow both organically and through acquisitions, joint ventures or other strategic
alliances. Acquisitions, joint ventures and strategic alliances may expose us to new operational, regulatory and market risks, as well as risks associated with additional capital requirements. We may not be able to identify suitable acquisition
candidates or alliance partners. Even if we identify suitable candidates or partners, we may be unable to complete an acquisition or alliance on terms commercially acceptable to us. If we fail to identify appropriate candidates or partners, or
complete desired acquisitions, we may not be able to implement our strategies effectively or efficiently.

In addition, our
ability to successfully integrate acquired companies and their operations may be adversely affected by a number of factors. These factors include:



| |  |  | diversion of managements attention;
| | - |  | ------------------------------------



| |  |  | difficulties in retaining personnel of the acquired companies;
| | - |  | --------------------------------------------------------------



| |  |  | unanticipated problems or legal liabilities; and
| | - |  | ------------------------------------------------



| |  |  | tax and accounting issues.
| | - |  | --------------------------

If we fail to integrate acquired companies efficiently, our earnings, revenue growth and business could be negatively affected.

Furthermore, the acquired companies may not perform to our expectations for various reasons, including legislative or regulatory changes that affect the products in which the acquired companies specialize
and the loss of key personnel and users. If we do not realize the benefits envisioned from such acquisitions, joint ventures or other strategic alliances, our overall profitability and growth plans may suffer.

We may be unable to secure additional funding or to obtain such funding on favorable terms.

We believe that our current cash and cash equivalents and the anticipated cash flow from operations will be sufficient to meet our
anticipated cash needs for the next 12 months. We may, however, require additional cash resources to finance our growth or other future developments, including investments or acquisitions. The amount and timing of such additional financing needs
will vary principally depending on the timing of new product or service launches, investments or acquisitions, and cash flow from our operations.



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If our resources are insufficient to satisfy our cash requirements, we may seek to sell
additional equity or debt securities or obtain a credit facility. The sale of additional equity securities or securities convertible into our common shares could result in additional dilution to our shareholders. The incurrence of indebtedness would
result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations.

Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:



| |  |  | investors perception of, and demand for, securities of mobile application store operators in China;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | conditions of the United States and other capital markets in which we may seek to raise funds;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | our results of operations, financial condition and cash flows;
| | - |  | --------------------------------------------------------------



| |  |  | PRC governmental regulation of foreign investment in China;
| | - |  | -----------------------------------------------------------



| |  |  | economic, political and other conditions in China; and
| | - |  | ------------------------------------------------------



| |  |  | PRC governmental policies relating to foreign currency borrowings.
| | - |  | ------------------------------------------------------------------

Financing may not be available in amounts or on terms acceptable to us, if at all, especially if a recession occurs or other events
cause volatility in capital markets worldwide.

We may experience fluctuations in quarterly operating results.

Our quarterly operating results have experienced fluctuations due to a variety of factors, including policy changes, the demand for our
offerings and our competitors products and services, the launch of new mobile applications and content through Maopao and our revenue sharing arrangements with industry participants. Although our revenue sharing arrangements with industry
participants vary within a small range, such differences may result in fluctuations in gross margin from period to period.

Our cost of revenues as a percentage of total revenues may be higher in a particular period if a handset company that is entitled to a
relatively higher percentage of sales proceeds introduces a new handset model through which we generate a substantial amount of revenues compared to other periods when revenues are generated through handsets from handset companies that are entitled
to a relatively lower percentage of sales proceeds. In addition, changes in policy and practices by network operators, including China Mobile, may affect the availability of mobile service providers and user experience in a particular period, result
in increased billing and transmission failure rates, cause delays associated with switching from certain service providers to others, and affect our quarterly results of operations.

Our revenues may be affected by seasonality. For example, our revenues tend to be higher during holiday periods when users tend to
purchase more applications and other content through our mobile application store. Such seasonality was less prominent in recent periods in which we achieved significant revenue growth, but may become more prominent in the future. We believe that
period-to-period comparisons of operating results are not necessarily indicative of our future results. If our operating results for any quarterly period fall below investor expectations or estimates by securities research analysts, the trading
price of our ADSs may decline.

Risks Related to Doing Business in China

Changes in economic and political policies of the PRC government could materially adversely affect the economic growth of China, negatively impacting our business.

We conduct substantially all of our business operations in China. Accordingly, our business, results of operations, financial condition
and prospects are subject to a significant degree to economic, political and legal developments in China. Due to the global financial crisis, the growth of the Chinese economy slowed in the second half of 2008 and early 2009. There is also
uncertainty with respect to the Chinese economy for 2012 and beyond. Any prolonged slowdown in the Chinese economy, in particular the mobile applications industry, could negatively impact our business, operating results and financial condition. For
example, our users may decrease spending on our offerings, while we may have difficulty expanding our user base to offset the impact of decreased spending by our existing users.



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The PRC government exercises significant control over Chinas economic growth through
direct allocation of resources, monetary and tax policies and a host of other government policies, such as those that encourage or restrict investment in certain industries by foreign investors, control the exchange between RMB and foreign
currencies and regulate the growth of the economy or specific markets. Government involvement has been instrumental in Chinas significant growth in the past 30 years. If the PRC governments policies fail to help the Chinese economy
achieve further growth or otherwise negatively affect our business, our growth rate, strategy and results of operations could be adversely affected.

If the PRC government determines that the contractual arrangements that establish the structure for operating our business do not comply with applicable PRC laws and regulations, we could be subject
to severe penalties.

We are a Cayman Islands company and, as such, we are classified as a foreign enterprise under
Chinese law, and our PRC subsidiaries, Hangzhou Dianneng Technologies Co., Ltd., or Dianneng, Pusida (Beijing) Technologies Co., Ltd., or Pusida, and Hangzhou Tiandian Investment Consulting Co., Ltd., or Tiandian, are foreign-invested enterprises.
Various regulations in China restrict foreign-invested entities from holding certain licenses required to operate mobile application store business, including telecommunications value-added services operation licenses, and from making certain
strategic investments in China. In light of these restrictions, we rely on our SPEs, Hangzhou Sky Network Technologies Co., Ltd., or Hangzhou Sky, Hangzhou Mijia Technologies Co., Ltd., or Mijia, Hangzhou Fanyi Technologies Co., Ltd., or Fanyi, and
Hangzhou Feineng Technologies Co., Ltd., or Feineng, to hold and maintain the licenses necessary to operate our mobile application store business in China and Hangzhou Sky Investment Co., Ltd., or Hangzhou Investment, to make strategic investments
in China. We do not have any equity interest in Hangzhou Sky, Mijia, Fanyi, Feineng or Hangzhou Investment, but receive their economic benefits through various contractual arrangements and certain corporate governance and shareholder rights
arrangements.

In addition, we have entered into agreements with Hangzhou Sky, Mijia, Fanyi, Feineng, Hangzhou Investment and
each of their shareholders that provide us with the ability to control Hangzhou Sky, Mijia, Fanyi, Feineng and Hangzhou Investment. For a description of these contractual arrangements, see Item 4. Information on the Company  C.
Organizational Structure  Contractual Arrangements with Hangzhou Sky and its Shareholders, Contractual Arrangements with Mijia and its Shareholders, Contractual Arrangements with Fanyi and its Shareholders, Contractual Arrangements with
Feineng and its Shareholders and Contractual Arrangements with Hangzhou Investment and its Shareholder.

Under the
equity pledge agreements included in these contractual arrangements, the shareholders of Hangzhou Sky, Mijia, Fanyi and Feineng pledged their respective equity interests in these SPEs to Dianneng and the shareholder of Hangzhou Investment pledged
its equity interests in Hangzhou Investment to Tiandian. According to PRC law, such a pledge must be registered with the relevant administration for industry and commerce. We have registered the pledge of our SPEs equity interests with the
local Administration for Industry and Commerce. However, we cannot assure you that Dianneng and Tiandian will be able to enforce these pledges if PRC laws and regulations applicable to the equity pledge change in the future.

The circular Regarding Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications
Business, or the Circular, issued by the MIIT in July 2006, reiterated the regulations on foreign investment in telecommunications businesses, which require foreign investors to set up foreign-invested enterprises and obtain a business operating
license to conduct any value-added telecommunications business in China. Under the Circular, a domestic company that holds a telecommunications value-added services operation license is prohibited from leasing, transferring or selling the license to
foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China.



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The local license holder must own the relevant trademarks and domain names that are used in
the value-added telecommunications business. The Circular further requires each telecommunications value-added services operation license holder to have the necessary facilities for its approved operations and to maintain such facilities in the
regions covered by its license. In addition, all value-added telecommunications mobile service providers must maintain network and information security in accordance with the standards set forth under relevant PRC regulations. Due to a lack of
interpretative materials from the regulator, it is unclear what impact the Circular will have on us or the other Chinese telecommunications and Internet companies that have adopted the same or similar corporate and contractual structures as ours.

On September 28, 2009, the General Administration of Press and Publication, or GAPP, together with the National
Copyright Administration and the National Office of Combating Pornography and Illegal Publications, jointly issued a Notice on Further Strengthening of the Administration of Pre-examination and Approval of Online Games and the Examination and
Approval of Imported Online Games, or the GAPP Notice. The GAPP Notice provides that foreign investors may not invest in online game operating businesses in China via wholly-owned, equity joint venture or cooperative joint venture investments, and
expressly prohibits foreign investors from gaining control over or participating in domestic online game operators through indirect measures such as establishing joint venture companies or contractual or technical arrangements.

As advised by our PRC counsel, Jincheng Tongda & Neal Law Firm, the provision of the GAPP Notice discussed above with respect
to regulation of online game operation does not apply to us or our subsidiaries or SPEs, nor does it affect our control over our subsidiaries and SPEs. However, substantial uncertainties remain regarding the interpretation and application of the
GAPP Notice. Accordingly, GAPP may ultimately take a view that is contrary to the opinion of our PRC legal counsel. In the event that we or any of our PRC operating companies violate the GAPP Notice in connection with the operation of online games,
GAPP in conjunction with the relevant regulatory authorities would have the power to investigate and deal with such violations, including in serious cases by refusing or cancelling relevant licenses and registrations.

In the opinion of Jincheng Tongda & Neal Law Firm, our PRC counsel, (i) the ownership structure and the business and
operation model of Hangzhou Sky, Mijia, Fanyi, Feineng, Dianneng, Hangzhou Investment and Tiandian are in compliance with all existing PRC laws and regulations and (ii) each contract under Diannengs contractual arrangements with Hangzhou
Sky, Mijia, Fanyi, Feineng and each of their shareholders and each contract under Tiandians contractual arrangements with Hangzhou Investment and its shareholder is valid and binding and will not result in any violation of PRC laws or
regulations currently in effect. However, we still could be found in violation of any current or future PRC laws and regulations. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including
the Circular and the GAPP Notice. Accordingly, we cannot assure you that PRC regulatory authorities will ultimately take a view that is consistent with the opinion of our PRC counsel.

If we are found to be in violation of any existing or future PRC laws or regulations, including the Circular and the GAPP Notice, or
fail to obtain or maintain any of the required permits or approvals, the relevant regulatory authorities would have broad discretion in dealing with such violation, including levying fines, confiscating our income, revoking Dianneng or
Tiandians business license or Hangzhou Sky, Mijia, Fanyi, Feineng or Hangzhou Investments business or operating licenses, requiring us to restructure the ownership structure or operations, and requiring us to discontinue all or any
portion of our mobile application store business. Any of these actions could significantly disrupt our business.

Our contractual
arrangements with Hangzhou Sky, Mijia, Fanyi, Feineng, Hangzhou Investment and their respective shareholders may not be as effective in providing control over Hangzhou Sky, Mijia, Fanyi, Feineng and Hangzhou Investment as direct ownership of these
companies.

We conduct our mobile application store business in China through Hangzhou Sky, Mijia, Fanyi and Feineng.
In addition, we pursue strategic investment opportunities in China through Hangzhou Investment. Our contractual arrangements with Hangzhou Sky, Mijia, Fanyi, Feineng, Hangzhou Investment and their respective shareholders provide us with effective
control over these companies. See Item 4. Information on the Company  C. Organizational Structure  Contractual Arrangements with Hangzhou Sky and its Shareholders, Contractual Arrangements with Mijia and its Shareholders,
Contractual Arrangements with Fanyi and its Shareholders, Contractual Arrangements with Feineng and its Shareholders and Contractual Arrangements with Hangzhou Investment and its Shareholder. As a result of these contractual arrangements, we
have control over, and we are considered to be the primary beneficiary, of Hangzhou Sky, Mijia, Fanyi, Feineng and Hangzhou Investment and, accordingly, we consolidate the results of operations, assets and liabilities of Hangzhou Sky, Mijia, Fanyi,
Feineng and Hangzhou Investment in our financial statements.



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Although Jincheng Tongda & Neal Law Firm, our PRC legal counsel, has advised us
that each contract under these contractual arrangements is valid, binding and enforceable under current PRC laws and regulations, these contractual arrangements may not be as effective in providing us with control over Hangzhou Sky, Mijia, Fanyi,
Feineng or Hangzhou Investment as direct ownership of these companies. In addition, Hangzhou Sky, Mijia, Fanyi, Feineng, Hangzhou Investment or their respective shareholders may breach the contractual arrangements.

We cannot assure you that when conflicts of interest arise, Hangzhou Sky, Mijia, Fanyi, Feineng, Hangzhou Investment and their
respective shareholders will act completely in our interests or that these conflicts of interests will be resolved in our favor. In any such event, we would have to rely on legal remedies under PRC law. These remedies may not always be effective,
particularly in light of uncertainties in the PRC legal system. See   Risks Related to Doing Business in China  Uncertainties with respect to the PRC legal system could materially adversely affect us.

Contractual arrangements we have entered into may be subject to scrutiny by PRC tax authorities, and a finding that we or our SPEs owe additional
taxes could reduce our net income and the value of your investment.

Under applicable PRC laws and regulations,
arrangements and transactions among related parties may be subject to audit or challenge by PRC tax authorities. We could face adverse tax consequences if PRC tax authorities determine that the contractual arrangements between our subsidiaries in
China on the one hand, and Hangzhou Sky, Mijia, Fanyi, Feineng and Hangzhou Investment on the other, do not represent an arms-length price and adjust Hangzhou Sky, Mijia, Fanyi, Feineng or Hangzhou Investments income in the form of a
transfer pricing adjustment.

A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax
purposes, of expense deductions recorded by Hangzhou Sky, Mijia, Fanyi, Feineng or Hangzhou Investment, which could in turn increase their respective tax liabilities. In addition, PRC tax authorities may impose late payment fees and other penalties
on our SPEs for underpaid taxes. Our net income may be adversely affected if our SPEs tax liabilities increase or if they are found to be subject to late payment fees or other penalties.

Our business benefits from certain government tax incentives. Expiration, reduction or discontinuation of, or changes to, these incentives will
increase our tax burden and reduce our net income.

Hangzhou Sky, as a software enterprise, is entitled
to a full exemption from enterprise income tax, or EIT, in 2008 and 2009 and a 50% reduced EIT rate from 2010 to 2012. The reduced applicable EIT rate for Hangzhou Sky from 2010 to 2012 is 12.5%. In addition, an enterprise qualified as a high
and new technology is entitled to a preferential EIT rate of 15%. Government authorities approved Hangzhou Skys qualification as a high and new technology enterprise in 2011, entitling Hangzhou Sky to a 15% preferential EIT
rate from 2012 to 2014.

After Hangzhou Skys qualification as a software enterprise expires at the end of
2012, it will be entitled to a 15% tax rate as long as it continues to qualify as a high and new technology enterprise. In addition, Mijia, as a software enterprise, is entitled to a full exemption from EIT in 2010 and 2011
and a 50% reduced EIT rate from 2012 to 2014. The reduced applicable EIT rate for Mijia from 2012 to 2014 is 12.5%. After Mijias qualification as a software enterprise expires, its applicable enterprise income tax rate may increase
to up to 25%, which could adversely affect our results of operations.

Furthermore, pursuant to relevant tax rules, each of
Hangzhou Sky, Mijia, Fanyi and Feineng is subject to a 3% business tax rate with respect to value-added telecommunications services that fall under the definition of value-added telecommunications services under the Catalog for Classifications of
Telecommunications Businesses. See Item 5. Operating and Financial Review and Prospects  Taxation.

Various
local governments in China have provided discretionary preferential tax treatments to us. However, these local governments may decide to reduce or eliminate these preferential tax treatments at any time. Furthermore, these local implementations of
tax laws may be found to violate national laws or regulations and we may be subject to retroactive imposition of higher taxes as a result. Any expiration, reduction or discontinuation of, or changes to, these tax incentives will increase our tax
burden and reduce our net income and materially adversely affect our operating results.



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We may rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash
and financing requirements we may have, and any limitation on the ability of our subsidiaries to make payments to us, or the tax implications of making payments to us, could materially adversely affect our ability to conduct our business.

We are a holding company, and we may rely on dividends and other distributions on equity from our subsidiaries in
China for our cash requirements. PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our
subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends.

Furthermore, if our subsidiaries in China incur debt in the future, the instruments governing the debt may restrict their
ability to pay dividends or make other payments to us. Most of our assets are held by, and substantially all of our earnings and cash flows are attributable to, our PRC subsidiaries. If earnings from our PRC subsidiaries were to decline, our
earnings and cash flow would be materially adversely affected.

Our cash flows are principally derived from dividends paid to
us by our PRC subsidiaries. As a result, our ability to distribute dividends largely depends on earnings from our PRC subsidiaries and their ability to pay dividends out of those earnings. We cannot assure you that our PRC subsidiaries will generate
sufficient earnings and cash flows in the future to make up the historical accumulated losses and pay dividends or otherwise distribute sufficient funds to enable us to meet our obligations, pay interest and expenses or declare dividends.

In addition, under the PRC Enterprise Income Tax Law and the Implementing Rules, both of which became effective on
January 1, 2008, dividends generated from our PRC subsidiaries after January 1, 2008 and payable to us may be subject to a withholding tax rate of 10% if the PRC tax authorities subsequently determine that we are a non-resident enterprise,
unless a tax treaty with China provides for a different withholding arrangement.

We may be classified as a resident
enterprise for PRC enterprise income tax purposes, which could result in our global income becoming subject to 25% PRC enterprise income tax.

The PRC Enterprise Income Tax Law provides that enterprises established outside of China whose effective management is located in China are considered resident enterprises and will
generally be subject to the uniform 25% EIT rate on global income. Under the implementation regulations, effective management is defined as substantial and overall management and control over such aspects as the production and business,
personnel, accounts and properties of an enterprise.

In April 2009, the State Administration of Taxation released a circular
that sets out the standards and procedures for determining the location of the effective management of an enterprise registered outside of the PRC and funded by Chinese enterprises as controlling investors, or a Chinese Funded
Enterprise. Under the circular, a Chinese Funded Enterprise shall be considered a resident enterprise if all of the following apply: (i) a Chinese Funded Enterprises major management department and personnel who are responsible for
carrying out daily operations are located in the PRC; (ii) the department or the personnel who have the right to decide or approve the Chinese Funded Enterprises financial and human resource matters are located in the PRC; (iii) the
major assets, account book, company seal and meeting minutes of the Chinese Funded Enterprise are located or stored in the PRC and (iv) directors or management personnel holding no less than 50% voting rights of the Chinese Funded Enterprise
habitually reside in the PRC.

The circular provides that the above standards shall apply to enterprises registered outside
of the PRC and funded by Chinese enterprises as controlling investors, and therefore such standards may be cited for reference only and may not be directly adopted when considering whether our effective management is in the PRC or not.
Accordingly, it is still uncertain whether we may be considered a resident enterprise under the PRC Enterprise Income Tax Law. If we are considered a resident enterprise and earn income other than dividends from our PRC subsidiary such as income
from our international operations, we will be subject to 25% PRC income tax on our global income, which could significantly increase our tax burden and materially adversely affect our cash flow and profitability.



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If we are classified as a resident enterprise for PRC enterprise income tax purposes, you
may be subject to PRC withholding tax on dividends from us or to PRC income tax on gains realized on the transfer of our ADSs or common shares.

Under the PRC Enterprise Income Tax Law and related implementation regulations, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are non-resident
enterprises, which do not have an establishment or place of business in the PRC, or which have such establishment or place of business if the relevant income is not effectively connected with the establishment or place of business, to the
extent such dividends have their source within the PRC. Similarly, any gain realized on the transfer of ADSs or shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC
unless a treaty otherwise provides.

If we are considered a PRC resident enterprise, it is unclear whether
dividends we pay with respect to our common shares or ADSs, or the gain you may realize from the transfer of our common shares or ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax. If we are required
under the PRC Enterprise Income Tax Law to withhold PRC income tax on dividends payable to our non-PRC investors that are non-resident enterprises, or if you are required to pay PRC income tax on the transfer of our common shares or
ADSs, the value of your investment in our common shares or ADSs may be materially adversely affected.

We face uncertainty regarding PRC
tax reporting obligations and consequences for certain indirect transfers of the stock of our operating company.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises
issued by the PRC State Administration of Taxation on December 10, 2009, where a foreign investor transfers the equity interests of a PRC resident enterprise indirectly by way of the sale of equity interests of an overseas holding company, or
an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor should report such
Indirect Transfer to the competent tax authority of the PRC within 30 days of execution of the equity transfer agreement for such Indirect Transfer.

The PRC tax authority will examine the true nature of the Indirect Transfer, and if the tax authority considers that the foreign investor has adopted an abusive arrangement without reasonable commercial
purposes in order to avoid PRC tax, it will disregard the existence of the overseas holding company used for tax planning purposes and re-characterize the Indirect Transfer. As a result, gains derived from such Indirect Transfer may be subject to
PRC withholding tax at a rate of up to 10%.

Uncertainties with respect to the PRC legal system could materially adversely affect us.

We conduct our business primarily through our subsidiaries and SPEs in China. Our operations in China are governed
by PRC laws and regulations. The PRC legal system is based on statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal
system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions
and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a
timely basis or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in China may be protracted and result in
substantial costs and divert resources and management attention.



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PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay
or prevent us from making additional loans or capital contributions to our PRC operating subsidiaries, which could materially adversely affect our liquidity and our ability to fund and expand our business.

As an offshore holding company of our PRC operating subsidiaries, we may make additional loans to our PRC subsidiaries, or we may make
additional capital contributions to our PRC subsidiaries. Loans by us to our subsidiaries in China, which are foreign-invested enterprises, to finance their activities cannot exceed statutory limits and must be registered with the State
Administration of Foreign Exchange, or SAFE, or its local counterpart.

Capital contributions must be approved by the PRC
Ministry of Commerce or its local counterpart. We may not be able to obtain these government approvals on a timely basis, if at all, with respect to future capital contributions by us to our PRC subsidiaries. If we fail to receive such approvals,
our ability to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

Governmental control of currency conversion may adversely affect the value of your investment.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in
RMB. Under our current corporate structure, our income is primarily derived from dividends and other payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit
sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations.

Under PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign
currencies without prior approval from State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into
foreign currency and remitted out of China to pay capital expenses, such as the repayment of loans denominated in foreign currencies.

The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining
sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

In addition, on August 29, 2008, SAFE promulgated Circular 142 to regulate the conversion of foreign currency into Renminbi by a foreign-invested company by restricting the use of the converted
Renminbi. Circular 142 requires that the registered capital of a foreign-invested company that has been settled in Renminbi converted from foreign currencies may only be used for purposes within its business scope approved by the applicable
governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the registered capital of a foreign-invested company settled in Renminbi converted from foreign
currencies.

The use of such Renminbi capital may not be changed without SAFEs approval, and may not in any case be
used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of Circular 142 will result in severe penalties, such as heavy fines. As a result, Circular 142 may significantly limit our ability to transfer the net
proceeds from any offering of our securities to our subsidiaries in the PRC. We may not be able to convert the net proceeds into Renminbi to invest in or acquire any other PRC companies, or establish other SPEs in the PRC.

Fluctuations in the value of the RMB may materially adversely affect the value of your investment.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in
political and economic conditions. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three
years. For almost two years after reaching a high against the U.S. dollar in July 2008, the Renminbi traded within a narrow band against the U.S. dollar, remaining within 1% of its July 2008 high.



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In June 2010, the PRC government announced that it would increase Renminbi exchange rate
flexibility. From June 2010 to March 2012, the RMB appreciated by 7.8% against the U.S. dollar. However, it remains unclear how this flexibility might be implemented. There remains significant international pressure on the PRC government to adopt a
more flexible currency policy, which could result in greater fluctuation of the Renminbi against the U.S. dollar.

Substantially all of our revenues, and a significant portion of our financial assets, are denominated in RMB. We principally rely on
dividends and other distributions paid to us by our subsidiaries in China. Any significant revaluation of the RMB may materially adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable
on, our ADSs in U.S. dollars. Any fluctuations of the exchange rate between the RMB and the U.S. dollar could also result in foreign currency translation losses for financial reporting purposes.

We may be subject to penalties, including restrictions on our ability to inject capital into our PRC subsidiaries and our PRC subsidiaries
ability to distribute profits to us, if our PRC resident shareholders or beneficial owners fail to comply with relevant PRC foreign exchange rules.

SAFE issued a public notice in October 2005 requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital
financing with assets or equities of PRC companies, or an offshore special purpose vehicle. PRC residents that are shareholders and/or beneficial owners of offshore special purpose companies established before November 1, 2005 were
required to register with the local SAFE branch before March 31, 2006. In addition, any PRC resident that is a shareholder of an offshore special purpose vehicle is required to amend its SAFE registration with respect to that offshore special
purpose company in connection with any increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China or other material changes in share capital. In May
2007, SAFE issued relevant guidance to its local branches with respect to the process for SAFE registration, which standardized more specific and stringent supervision of the registration relating to the SAFE notice.

As of the date of this annual report, all of our shareholders and beneficial owners who are subject to the SAFE notice have obtained
registration in accordance with its requirements. They are filing amendments on their SAFE registration with respect to the restructuring of our offshore holding companies as well as the offering and listing of shares of the Company as required
under the SAFE notice.

We are committed to comply with the SAFE notice and have taken steps to ensure that our shareholders
and beneficial owners who are subject to the SAFE notice also comply with the relevant rules. However, we cannot provide any assurance that all of our shareholders and beneficial owners who are PRC residents will comply with our request to make,
obtain or update any applicable registrations or comply with other requirements required by the SAFE notice or other related rules. In case of any non-compliance on any of our PRC resident shareholders or beneficial owners, our PRC subsidiaries and
such shareholders and beneficial owners may be subject to fines and other legal sanctions, including restriction on our ability to contribute additional capital into our PRC subsidiaries and our PRC subsidiaries ability to distribute dividends
to our offshore holding companies, which will adversely affect our business.

The approval of the China Securities Regulatory
Commission, or the CSRC, may have been required in connection with our initial public offering in December 2010 under PRC regulations. The regulation also establishes more complex procedures for acquisitions conducted by foreign investors that could
make it more difficult for us to grow through acquisitions.

On August 8, 2006, six PRC regulatory agencies,
including the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC and SAFE jointly adopted the Regulations on Mergers
and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rule, which became effective on September 8, 2006. The M&A Rule requires offshore special purpose vehicles that are controlled by PRC companies or residents and
that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock
exchange.



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On September 21, 2006, the CSRC published a notice on its website specifying the
documents and materials that special purpose vehicles are required to submit when seeking CSRC approval for their listings outside of China. The interpretation and application of the M&A Rule remain unclear, and our initial public offering may
have required approval from the CSRC. If CSRC approval had been required for our initial public offering in December 2010, our failure to obtain or delay in obtaining such approval would subject us to sanctions imposed by the CSRC and other PRC
regulatory agencies, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially adversely affect our business,
results of operations and financial condition.

Our PRC counsel, Jincheng Tongda & Neal Law Firm, has advised us
that, based on their understanding of the current PRC laws, regulations and rules and the procedures announced on September 21, 2006, because (i) we established our PRC subsidiaries by means of direct investment other than by merger or
acquisition of the equity or assets of PRC domestic companies and (ii) our contractual arrangements with Hangzhou Sky and Mijia do not constitute the acquisition of Hangzhou Sky and Mijia, we were not required to apply with the CSRC for the
approval of the listing and trading of our ADSs on the NASDAQ Global Market.

The M&A Rule also established additional
procedures and requirements that are expected to make merger and acquisition activities in China by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of
any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, or that the approval from the Ministry of Commerce be obtained in circumstances where overseas companies established or controlled by PRC
enterprises or residents acquire affiliated domestic companies. We may grow our business in part by acquiring other companies operating in our industry. Complying with the M&A Rule to complete such transactions could be time-consuming, and any
required approval processes, including approval from Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

Failure to obtain or maintain all applicable permits and approvals would materially adversely affect our business.

Our SPEs may be required to obtain applicable permits or approvals from relevant regulatory authorities in order to operate. For
example, we began to offer mobile video through one of our SPEs in May 2010 but have not generated significant revenues from such content. Pursuant to PRC regulations, to offer mobile video content, the operating entity is required to obtain an
online audio-visual broadcasting license. Further, the regulations only allow state-owned or state-controlled entities to apply for such license.

One of our SPEs entered into a one-year cooperation agreement with an independent third party with an online audio-visual broadcasting license in August 2010 pursuant to which we provide our mobile video
content jointly with such third party under such third partys license. Upon the expiration of the initial term, we renewed this agreement for an additional one-year term in August 2011. However, the third party could terminate the cooperation
agreement and we may not be able to renew such agreement on terms acceptable to us after such agreement expires in August 2012. In such case, we may not be able to find another third party with an online audio-video broadcasting license who is
willing to enter into a similar cooperation agreement with us and we may not be able to continue providing mobile video content.

In addition, if government authorities challenge our practice, we may be subject to various penalties, including fines and the discontinuation of or restriction on our offering of mobile video subject to
the regulations. Any such disruption in operations would materially adversely affect our financial condition and results of operations.

We face risks of health epidemics and other disasters, which could severely disrupt our operations.

Our business could be materially adversely affected by the outbreak of H1N1, or swine influenza, avian influenza, severe acute
respiratory syndrome, or SARS, or another epidemic. In 2009 and early 2010, there were outbreaks of swine influenza in certain regions of the world, including China. In 2006 and 2007, there were reports of avian influenza in various parts of China,
including a few confirmed human cases and deaths. Any prolonged recurrence of swine influenza, avian influenza, SARS or other adverse public health developments in China could adversely affect economic activities in China and require the temporary
closure of our offices. Such closures could severely disrupt our business and adversely affect our results of operations.



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Our operations are vulnerable to interruption and damage from man-made or natural
disasters, including wars, acts of terrorism, snowstorms, earthquakes, fire, floods, environmental accidents, power loss, communications failures and similar events. If any man-made or natural disaster were to occur in the future, our ability to
operate our business could be seriously impaired.

Labor laws in the PRC may adversely affect our results of operations.

China adopted a labor contract law effective on January 1, 2008 that establishes more restrictions and
increases costs for employers to dismiss employees. For example, the labor contract law requires certain terminations to be based upon seniority and not merit. If we significantly change or decrease our workforce in the PRC, the labor contract law
could adversely affect our ability to effect such changes in a timely and cost effective manner, and our results of operations could be adversely affected. In addition, the labor contract law requires employers to pay compensation to their employees
who agree to bear non-competition obligations on a monthly basis after the employees employments expire or terminate, which will increase employers operating expenses.

Risks Related to Our Shares and ADSs

The market price for our ADSs may be volatile,
which could result in substantial losses to you.

The market price for our ADSs may be volatile and subject to wide
fluctuations in response to factors such as actual or anticipated fluctuations in our quarterly results of operations, changes in financial estimates by securities research analysts, changes in the economic performance or market valuations of other
companies operating in our industry, announcements by us or our competitors of material acquisitions, strategic partnerships, joint ventures or capital commitments, fluctuations in exchange rates between the RMB and the U.S. dollar, intellectual
property litigation, release of lock-up or other transfer restrictions on our outstanding shares or ADSs, and economic or political conditions in China. In addition, the performance and fluctuation in market prices of other companies with operations
located mainly in China that have listed their securities in the United States may affect the volatility in the price and trading volumes of our ADSs.

Volatility in global capital markets, as was experienced during the global financial crisis, could also have an adverse effect on the market price of our ADSs. Furthermore, the securities market has from
time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially adversely affect the market price of our ADSs.

Future sales or issuances of a substantial number of our ADSs or common shares could adversely affect the price of our ADSs.

If our shareholders sell substantial amounts of our ADSs, including those issued upon the exercise of outstanding options, in the public
market, the market price of our ADSs could fall. Such sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. If any existing shareholder or shareholders
sell a substantial amount of common shares, the prevailing market price for our ADSs could decline.

In addition, we may
issue additional common shares or ADSs to fund future acquisitions or our operations. Your ownership interest in our company would be diluted and this, in turn, could materially adversely affect the price of our ADSs.

You may not have the same voting rights as the holders of our common shares and must act through the depositary to exercise your rights.

As an ADS holder, you may only exercise voting rights with respect to the underlying common shares in accordance
with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will vote the underlying common shares in accordance
with these instructions. Otherwise, you will not be able to exercise your right to vote unless you withdraw the common shares underlying your ADSs.



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Pursuant to our amended and restated memorandum and articles of association, we may convene
a shareholders meeting upon ten clear days notice. When a shareholders meeting is convened, you may not receive sufficient advance notice to withdraw the common shares underlying your ADSs to allow you to vote with respect to any
specific matter. If we give timely notice, the depositary will notify you of the upcoming vote and arrange to deliver our voting materials to you.

We cannot assure you that you will receive the voting materials in time to instruct the depositary to vote the common shares underlying your ADSs. In addition, the depositary and its agents are not
responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote and the common shares underlying your ADSs may not be voted as you
requested.

Your right to participate in any future rights offerings may be limited, which may dilute your holdings and you may not
receive cash dividends if it is impractical to make them available to you.

We may, from time to time, distribute
rights to our shareholders, including rights to acquire our securities. However, we cannot make any such rights available to you in the United States unless we register such rights and the securities to which such rights relate under the Securities
Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary bank will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities
are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a
registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in
your holdings.

In addition, the depositary has agreed to pay you the cash dividends or other distributions it or the
custodian receives on our common shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of common shares your ADSs represent. However, the depositary may, at its
discretion, decide that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value
of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to the such property and you will not receive such distribution.

You may be subject to limitations on the transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time
to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any
time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited
because we are organized under Cayman Islands law, conduct substantially all of our operations in China and all of our directors and officers reside outside the United States.

We are organized in the Cayman Islands and substantially all of our assets are located outside of the United States. We conduct
substantially all of our operations in China through our subsidiaries and SPEs in China. All of our officers and directors reside outside the United States and a substantial portion of the assets of those persons are located outside of the United
States. As a result, it may be difficult for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the securities laws or otherwise.

Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to
enforce a judgment against our assets or the assets of our directors and officers. In addition, it is uncertain whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons
predicated upon the civil liability provisions of the securities laws of the United States or any state, and it is uncertain whether Cayman Islands or PRC courts would be competent to hear original actions brought in the Cayman Islands or the PRC
against us or such persons predicated upon the securities laws of the United States or any state.



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Our corporate affairs are governed by our memorandum and articles of association and by the
Companies Law and common law of the Cayman Islands. The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are
to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive,
but not binding, authority on a court in the Cayman Islands.

The rights of our shareholders and the fiduciary
responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, because Cayman Islands law has no legislation
specifically dedicated to the rights of investors in securities, and thus no statutorily defined private causes of action to investors in securities such as those found under the Securities Act or the Securities Exchange Act of 1934 in the United
States, it provides significantly less protection to investors. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the federal courts of the United States.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against
our management, directors or major shareholders than would shareholders of a corporation organized in a jurisdiction in the United States.

Our articles of association contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our
shareholders opportunity to sell their shares, including common shares represented by our ADSs, at a premium.

Our amended and restated articles of association contain provisions to limit the ability of others to acquire control of our company.
These provisions could deprive our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction.
For example, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional
or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with
our common shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult.

If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the
holders of our common shares and ADSs may be materially adversely affected. Furthermore, our amended and restated articles of association provide for a staggered board, which means that our directors are divided into three classes, with one-third of
our board standing for election every year. This means that at least two annual shareholders meetings, instead of one, are generally required in order to effect a change in a majority of our directors. Our staggered board can discourage proxy
contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to take control of our board in a relatively short time. In addition, our shareholders holding, in
aggregate, less than 25% of the paid up capital of our company do not have the ability to call general meetings or to propose special matters for consideration at such meetings.

We believe we may be a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or common shares.

Based on the market price of our ADSs, the value of our assets and the composition of our income and assets, we believe we were a
passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ended March 31, 2012. A non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such
year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive
income. A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year.



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Because the value of our assets for purposes of the PFIC test will generally be determined
by reference to the market price of our ADSs and common shares, our PFIC status will depend in large part on the market price of our ADSs and common shares, which may fluctuate significantly. Because we believe we were a PFIC for the taxable year
ended March 31, 2012, certain adverse U.S. federal income tax consequences could apply to U.S. Holders (as defined in Item 10. Additional Information  E. Taxation  United States Federal Income Taxation) of our ADSs or
common shares with respect to any excess distribution received from us and any gain from a sale or other disposition of our ADSs or common shares. See Item 10. Additional Information  E.Taxation  United States Federal
Income Taxation  Passive Foreign Investment Company.



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------



|A. | History and Development of the Company
|-- | --------------------------------------

Our legal and commercial name is Sky-mobi Limited. We commenced operations through Hangzhou Sky, a limited liability company established in China, in 2005. Hangzhou Sky is principally engaged in our
cooperation with handset companies and providing mobile applications and content to our users. To enable us to raise capital from international investors, our holding company, Sky-mobi Limited (formerly Profit Star Limited), was incorporated under
the laws of the Cayman Islands as an exempted limited liability company in April 2007. In June 2007, we incorporated Pusida, our wholly-owned subsidiary in China.

PRC laws restrict foreign-invested entities engaging in value-added telecommunication services. To comply with PRC laws, we conduct our value-added telecommunication services through four SPEs, Hangzhou
Sky, Mijia, Fanyi and Feineng. In August 2007, through Pusida, we entered into certain contractual arrangements with Hangzhou Sky and its shareholders through which we gained effective control over the operations of Hangzhou Sky.

In January 2007, Mijia was incorporated in China. In August 2007, through Pusida, we entered into certain contractual arrangements with
Mijia and its shareholders through which we gained effective control over the operations of Mijia.

On August 2, 2007,
we issued in a private placement an aggregate of 50,000,000 Series A preferred shares for an aggregate purchase price of US$3.5 million to Sequoia Capital China II L.P.

In July 2009, Fanyi was incorporated in China. In December 2009, we incorporated Dianneng, our wholly-owned subsidiary in China. In December 2009, through Dianneng, we entered into certain contractual
arrangements with Fanyi and its shareholders through which we gained effective control over the operations of Fanyi.

In
July 1, 2010, through Dianneng, we entered into contractual arrangements with Hangzhou Sky, Mijia and their respective shareholders to replace their previous contractual arrangements with Pusida.

In May 2010, we incorporated Profit Star Software (HK) Limited, or Profit Star HK, our wholly-owned subsidiary, in Hong Kong. We
transferred all of our equity interest in Pusida and Dianneng to Profit Star HK.

In May 2010, we and an independent third
party established Shenzhen Heisha Technologies Co., Ltd., or Heisha. We invested RMB3.0 million and obtained a 65% equity interest in Heisha. Heisha cooperates with overseas parties to provide mobile payment processing agent services in overseas
markets, such as India, Thailand and the Philippines. In July 2010, Sky Global Network Technologies Limited (Hong Kong), a wholly-owned subsidiary of Fanyi, was incorporated in Hong Kong, primarily engaging in mobile application store services for
overseas markets.

In October 2010, Profit Star Limited changed its name to Sky-mobi Limited.

In October 2010, we incorporated Sky Network International Limited, or Sky BVI, our wholly-owned subsidiary, in the British Virgin
Islands. We made Sky BVI our intermediary holding company by transferring all of our equity interest in Profit Star HK to Sky BVI.



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On November 18, 2010, our shareholders approved a 200-for-1 share split of our common
shares and Series A preferred shares, which became effective immediately. At the same time, the par value of the shares changed from US$0.01 per share to US$0.00005 per share. Unless otherwise noted, all share information and per share data included
in the annual report and accompanying financial statements has been adjusted to reflect this share split and change in par value.

On December 3, 2010, Feineng was incorporated in China. Feineng focuses primarily on our cooperation with mobile service providers. In February 2011, through Dianneng, we entered into certain
contractual arrangements with Feineng and its shareholders through which we gained effective control over the operations of Feineng.

On December 15, 2010, we completed our initial public offering of 6,125,000 ADSs, each representing eight common shares of par value US$0.00005 per share. We listed our ADSs on the NASDAQ Global
Market, or NASDAQ, on December 10, 2010.

On April 13, 2011, we sold a portion of our equity interests in Heisha to
its minority shareholder for cash consideration of RMB1,152,000. Further, Heisha issued additional preferred shares to a third party partner, which further diluted our shareholding percentage in Heisha to 31%. As a result, we no longer control
Heisha.

In August 2011, we, through Profit Star HK, our wholly-owned subsidiary, established JSky Technology Limited, or
JSky Cayman, in the Cayman Islands, with iaSolution Investment (BVI) Limited, an independent third party. We invested US$90,000 and obtained a 60% equity interest in JSky Cayman. JSky Cayman primarily engages in mobile application store services for
overseas markets.

In September 2011, we incorporated Me Share Limited in Hong Kong, which was 100% held by Sky BVI. Me Share
Limited primarily engages in mobile application store services for overseas markets, with a majority of its R&D support from Shanghai Texuan Information Technologies Co., Ltd., Me Share Limiteds wholly owned subsidiary in China.

In October 2011, Hangzhou Investment was incorporated in China. Hangzhou Investment focuses primarily on pursuing strategic
investment opportunities in China. In December 2011, we incorporated Tiandian, our wholly-owned subsidiary in China, and entered into certain contractual arrangements with Hangzhou Investment and its shareholder through which we gained effective
control over the operations of Hangzhou Investment.

In December 2011, we incorporated Sky Technologies International
Limited, or Sky Technologies BVI, our wholly-owned subsidiary, in the British Virgin Islands. We then transferred all of our equity interest in Me Share Limited to Sky Technologies BVI.

In April 2012, Me Share Limited changed its name to Powerplay Technologies Limited.

Our principal executive offices are located at 10/F, Building B, United Mansion, No. 2, Zijinghua Road, Hangzhou,
Zhejiang 310013, Peoples Republic of China. Our telephone number at this address is +86-571-87770978. Our registered office in the Cayman Islands is located at the offices of Codan Trust Company (Cayman Limited) at Cricket Square,
Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.



|B. | Business Overview
|-- | -----------------

We
operate the leading mobile application store in China measured by revenues in 2010, according to a report commissioned by us and prepared by Analysys International in July 2011, an independent research and advisory firm, or the 2011 Analysys Report.
The 2011 Analysys Report estimates that our revenues accounted for approximately 50% of all revenues generated from mobile application stores in China in 2010.

In our Maopao application store, users can browse, download and purchase a wide range of applications and content, such as games, music and books. In addition, we have established a leading mobile social
network community in China, the Maopao Community, where we operate mobile social games and provide applications and content with social network functions to our registered members. Maopao enables mobile applications and content to be downloaded and
run on a variety of mobile handsets with different hardware and operating system configurations. Through Maopao, we have captured a large market share in the feature phone market, the largest mobile phone segment in China.



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On April 27, 2011, we announced the launch of OPENSKY, a plug-in that enables social
functions on standalone mobile phone applications. OPENSKY offers real time user-to-user combat, rankings, virtual item sales, live chatting and application based social networks on a previously single-user standalone application.

In May 2012, we launched a new Maopao application store and OPENSKY platform in response to the growing smart phone market. We have also
established physical stores to help customers who do not have readily available computer access or high speed mobile network connections to install our Maopao application store and download our applications and content.

We collaborate with handset companies to pre-install Maopao on mobile handsets before shipment, and from January 1, 2007 to
March 31, 2012, Maopao had approximately 977 million cumulative users. Over the same period, we offered over 2,070 applications and over 133,400 content titles in our Maopao application store, and the cumulative number of downloads reached
8.4 billion.

As an innovator of the mobile application business model in China, we are centrally positioned in Chinas
mobile application sector, which includes:



| |  |  | users, especially younger users with modest income, who constitute the majority of Chinas mobile phone user base. Maopao enables
our users, who have a strong desire for social interaction, acceptance and entertainment, to enjoy handsets with more entertainment functions, social networking, mobile social games and a wide selection of high quality applications and content at
attractive price points, often after a free trial;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | handset companies, including handset manufacturers and independent design houses. These handset companies pre-install Maopao, which
provides users with a standardized interface to download and use mobile applications and content. We work closely with handset companies to optimize the performance of Maopao on each of their handset models and enhance user experience. As of
March 31, 2012, we had entered into cooperation agreements with over 860 handset companies to pre-install Maopao;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | content providers, including application developers and content title owners. Through Maopao, their applications and content can be
delivered to thousands of handset models without extensive customization to hundreds of millions of potential users. We had entered into agreements with over 300 content providers as of March 31, 2012 to provide a variety of applications and
other content, ranging from single-user applications and popular mobile social games to social network applications that appeal to Chinese users. We provide our standard software development kits free of charge to content providers and provide
technological support to simplify their development process and accelerate their time-to-market; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | payment service providers, including mobile service providers and other payment processing agents. We primarily collect sales proceeds
from mobile service providers who utilize mobile network operators billing channels to collect payments when users purchase products from Maopao. We also work with independent payment processing agents to collect sales proceeds through a
variety of payment channels, including pre-paid phone cards, pre-paid game cards, bank debit cards, wire-transfers, Alipay and others. As of March 31, 2012, we had entered into agreements with over 90 mobile service providers in China and
overseas and 6 independent payment processing agents.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We share sales proceeds from Maopao with handset
companies, content providers and payment service providers, which we believe helps align the interests of these industry participants with ours, motivates them to provide better products and services and fosters a long-term mutually beneficial
relationship with us.

We have grown substantially since we launched Maopao in 2006. Approximately 1,613.9 million,
3,331.8 million and 3,448.7 million downloads of applications and content titles from Maopao occurred in the fiscal years ended March 31, 2010, 2011 and 2012, respectively.



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On our Maopao Community, our registered members can create virtual profiles, befriend
others who share similar ideas, interests or activities and view the profiles or track the status of their friends through blogs, pictures, instant messages and other functions. One of the most popular features of the Maopao Community is mobile
social games, where our registered members interact with each other in the wireless game world. We operate these mobile social games on our own server network through advanced cloud computing technology to try to ensure the best user experience. As
of March 31, 2012, our Maopao Community attracted 170.6 million registered members and our peak concurrent users reached approximately 333,370. We offer our own virtual currency, K Currency, for members of our Maopao Community to purchase
virtual items in our social network applications and mobile social games.

Maopao Application Store

Maopao is the largest mobile application store in China measured by revenues in 2010, according to the 2011 Analysys Report. Maopao
enables:



| |  |  | handset companies to pre-install Maopao and applications and content onto mobile handsets to enhance handset features. With Maopao, mobile phones can
expand the portfolios of mobile applications and content available to their users, enhancing the attractiveness of handsets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | content providers to gain access to a large number of users and potential users without extensively customizing content for different handset models.
They can focus on developing new content without concerns of compatibility with the hardware, software and operating systems of different mobile handsets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | users to conveniently browse, download and purchase mobile applications and content from our mobile application store by wirelessly downloading
applications or accessing content on their handsets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | us and other industry participants to collect payments from users through payment service providers, including mobile service providers and independent
payment processing agents. The availability of these user-friendly payment channels allows us to incentivize other industry participants and align their interest with ours via sharing of sales proceeds.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We believe our innovative and sustainable business model has fueled our growth. From January 1, 2007 to March 31, 2012, Maopao
had approximately 977 million cumulative users. In the period from January 1, 2007 to March 31, 2012, we offered over 2,070 applications and 133,400 content titles on Maopao and the cumulative number of downloads had reached 8.4
billion.

Our Users

Most users access our applications and content offerings primarily through the pre-installed Maopao application store on their mobile handsets. Users can also download applications or content available
through Maopao over-the-air. We also offer users the option of downloading certain applications from our website, 51mrp.com. Furthermore, we have designed versions of Maopao which can be easily downloaded to mobile handsets that have not
pre-installed Maopao.

The number of registered members of our Maopao Community network has grown approximately 8.4 times,
from approximately 20.4 million members as of March 31, 2010 to approximately 170.6 million members as of March 31, 2012. In the fiscal year ended March 31, 2011, we had 77,253 average concurrent users on the Maopao
Community network, compared to 136,321 average concurrent users in the fiscal year ended March 31, 2012.

On the
strength of this large user base, we have accumulated valuable statistical usage data. We utilize such data to better understand and predict user demand for our offerings and their price sensitivity, which help us launch and price new applications.
We also utilize user feedback to upgrade existing applications and content available on Maopao and improve user experience.



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The following table sets forth our selected quarterly Maopao Community operating data for
the periods indicated:



|                         |  |                                  |         |  |                   |  |         |                  |  |  |               |  |  |  |       | 
|------------------------ |  | -------------------------------- | ------- |  | ----------------- |  | ------- | ---------------- |  |  | ------------- |  |  |  | ----- | 
|                         |  | For the Three-Month Period Ended |        
|                         |  | June 30,2011                     |         |  | September 30,2011 |  |         | December 31,2011 |  |  | March 31,2012 | 
|                         |  | (in millions)                    |        
|Number of active members |  |                                  | 14.7    |  |                   |  | 16.7    |                  |  |  | 16.9          |  |  |  | 17.3  | 
|Number of member log-ins |  |                                  | 1,360.6 |  |                   |  | 1,440.4 |                  |  |  | 1,101.5       |  |  |  | 775.1 | 

Applications and Content Available Through Maopao

The main categories of mobile applications and content available through Maopao include:



| |  |  | community-based applications and content, including mobile social games and social network applications; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | single-user applications and content, including single-player games, multimedia applications and other single-user content.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

We have significantly increased application and content offerings on Maopao. In the fiscal years ended
March 31, 2010, 2011 and 2012, the total number of single-user applications and content titles offered on Maopao totalled 30,342, 79,359 and 135,392, respectively.

We control the availability and placement of content on Maopao, which we update periodically based on user demand and the availability of newly developed applications and content. For each category of
applications and content on Maopao, we offer a certain percentage of free applications to enhance user interest in Maopao as well as user familiarity with and acceptances of applications and content on Maopao. The following table sets forth the
categories, number of applications and content titles offered and number of downloads for the fiscal year ended March 31, 2012:



|                                                           |  |                                                                              |  |                                                  |         | 
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------- |  | ------------------------------------------------ | ------- | 
|                                                           |  | Applications/Content Titles Offered for the
Fiscal Year Ended March 31, 2012 |  | Downloads in the Fiscal YearEnded March 31, 2012 |        
|                                                           |  | (in millions)                                                                | 
|Maopao Community-based Applications                        |  |                                                                              |  |                                                  |         | 
|Mobile Social Games and Social Network Applications        |  | 68 Applications                                                              |  |                                                  | 226.0   | 
|Single-user Applications and Content Titles                |  |                                                                              |  |                                                  |         | 
|Single-Player Games                                        |  | 1,591 Applications                                                           |  |                                                  | 1,279.7 | 
|Multimedia Applications and Content Titles                 |  |                                                                              |  |                                                  |         | 
|Mobile Books                                               |  | One Application and 82,961 Content Titles                                    |  |                                                  | 207.0   | 
|Mobile Music                                               |  | Six Applications and 11,954 Content Titles                                   |  |                                                  | 153.5   | 
|Mobile Video                                               |  | Three Applications and 21,365 Content Titles                                 |  |                                                  | 125.2   | 
|Pictures and Wallpapers                                    |  | One Application and 17,134 Content Titles                                    |  |                                                  | 40.3    | 
|Other Single-User Applications and Content Titles          |  | 396 Applications and 446 Content Titles                                      |  |                                                  | 1,417.0 | 
|                                                           |  |                                                                             
|Total Single-User Application and Content Titles Downloads |  |                                                                              |  |                                                  | 3,222.7 | 

Mobile Social Games and Social Network Functions

We offer a variety of mobile social games and social network functions, such as instant messaging, blogging, personal profiling, content
sharing and virtual gifting, on our Maopao Community. The Maopao Community had 65.6 million active members and 4,677.6 million member log-ins in the fiscal year ended March 31, 2012, compared to 38.5 million active members and
2,715.7 million member log-ins in the fiscal year ended March 31, 2011. Some of our mobile social games, such as Fantasy of the Three Kingdoms, are mobile versions of popular Internet based games, which require players to have
game-specific applications installed to enable access to game servers. We also offer mobile social versions of popular card games and strategic games.



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Many of our mobile social games adopt an item-based revenue model. Mobile users can
download a game and play the basic functions for free. We charge mobile users when they purchase in-game items, such as performance-enhancement skills, weapons and accessories. For example, there are more than a hundred in-game items available for
download in the Fantasy of the Three Kingdoms, and each item typically costs RMB0.1 to RMB10.

We have a wide selection of
social network tools on Maopao, including the mobile versions of popular Internet applications in China, such as QQ instant messenger and Sina Microblog, as well as our own Maopao Community social network.

In October 2011, we entered into a strategic agreement with SINA Corporation, a leading online media company and mobile value-added
service provider in China, pursuant to which Weibo.com has been made available as a downloadable application via our Maopao application store and via technical plug-ins to our Maopao mobile social network. Our users can use their existing Maopao
Community access to directly log on to Weibo.com.

The Maopao Community had approximately 170.6 million registered
members as of March 31, 2012 and offers instant messaging, blogs and other mobile applications and content enabling user interaction on our Maopao Community. We offer most social network tools for free, but may charge for virtual gifts and
other items, usually at RMB0.1 to RMB8 per item.

Single-Player Games

Single-player games involve a single player and usually relatively simple rules, such as card games, simple strategic games and action
games. We offered approximately 1,591 single-player games through Maopao during the fiscal year ended March 31, 2012 and approximately 1,279.7 million downloads of our single-player games occurred in the fiscal year ended March 31,
2012, compared to 851.0 million and 1,352.6 million in the fiscal years ended March 31, 2010 and 2011, respectively. Our most popular single-player games include Happy Dou Di Zhu, a card game, and Super Spy, a role-playing and action
game.

We offer a number of free single-player games on Maopao. Once users are familiar with our free games and choose to pay
for a more sophisticated version of the game, they can download the game, usually for approximately RMB2 to RMB4 per game. In addition, we usually charge users RMB0.1 to RMB10 for purchasing an in-game item, such as performance-enhancement skills,
weapons and accessories. We also offer periodic promotions in which mobile phone users can download a package of single-player games for a special price. For some single-player games, we charge a one-time subscription fee to allow users to play
these games an unlimited number of times over a period, typically less than one month. We record revenues from these subscriptions at the time of download given (i) we have no substantive ongoing performance obligations and (ii) the
subscription period is relatively short. Such one-time subscription revenue is not material.



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Multimedia Applications



| |  |  | Mobile music players. Our mobile music applications offer access to mainstream music content providers such as Ai Ting Bar. Users can stream
music directly to their handsets or download songs to be stored in their handsets or used as ringtones. Users may stream music for free, and pay approximately RMB2 to download a song or lyrics. Users can also choose an unlimited download package for
RMB10 per month, or RMB6 to RMB8 per half month.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mobile book reader. Users can subscribe to our proprietary e-book application, Kaiyue, and download books for approximately RMB2 to RMB4 per
book, or choose an unlimited download package for RMB18 per month.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Mobile video players. Users can download video clips to be stored in their mobile phones for RMB8 to RMB10 per month for an unlimited download
package.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pictures and wallpapers. Users can download images to be stored in their mobile phones or used as wallpapers for approximately RMB2 for one set
of images, or RMB8 for fifteen sets of images (each set contains six images).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenues from unlimited
download package of multimedia applications are not material.

Other Single-User Mobile Applications



| |  |  | E-Commerce. Mobile users can purchase lottery tickets and recharge the balance on their pay-as-you-go mobile phones through applications on
Maopao.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | WAP Internet access. We offer WAP Internet access to websites preapproved by us through the Maopao browser, our proprietary WAP browser.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other Applications. Users can access a broad range of other applications through Maopao. Some of the most popular applications include instant
maps, real-time stock quotes and analysis, 139 mailbox, weather, network clock and electronic dictionary. We offer most of these applications for free.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Content Sourcing and Management

The popularity and success of our
application store depend on the quality of applications and content on Maopao. We effectively manage the applications and content on Maopao to offer high-quality applications and content, simplify user selection experience and provide value to our
users. Using our statistical user behavior data and user feedback, we provide our in-house development team and content providers with suggestions and guidance on applications and content that meet user needs, and periodically set development focus
for them.

We strive to maintain close relationships with creative third-party content providers and motivate them to
introduce appealing applications through Maopao. Maopao provides content providers with access to a large user base, enabling them to design content that can be delivered to handsets with a myriad of hardware and operation system configurations,
without extensive customization work. Furthermore, we believe our extensive mobile user base and our ability and efforts to restrict piracy on Maopao enhance the attractiveness of our sales proceeds sharing mechanism compared with that of some of
our competitors.

We selectively collaborate with content providers and had entered into agreements with over 300 content
providers as of March 31, 2012. Our content providers include some of the most popular Internet companies in China, such as Baidu, and also many independent content development companies. Mobile service providers also sell their mobile
applications and content to mobile phone users through Maopao. We select content providers based on reputation, track record and the needs of mobile users and handset companies. We currently do not work with individual developers. We also have a
standardized process to assist content providers to develop and launch applications and content.

While third parties
developed a substantial majority of the applications and content titles available through Maopao, we also have in-house programming capability to develop certain popular applications, such as our mobile book reader, mobile music players,
single-player games and social network applications, in order to maximize our ability to capture value in the content supply chain.



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In our Maopao application store, we update the user interface weekly to prioritize new and
popular content offerings. We usually display over ten popular applications on the first page of Maopao. We actively position our content offerings on Maopao based on our analysis of statistical user behavior data and user preferences. We try to
ensure that our content offerings are not duplicative and eliminate internal competition among the applications and content offered in the Maopao application store.

Contract Terms with Content Providers

We pay content providers a
percentage of the proceeds we receive from our payment channels. To incentivize developers investment in certain applications that may require more resources and a longer time to develop than simple applications, such as mobile social games,
we sometimes pay content developers a minimum guaranteed amount to cover part of their development costs in addition to sharing the sales proceeds generated from such applications. For certain simple applications such as card games, we may make a
one-time payment to the content developers for all rights associated with a particular application. For mobile social games, we usually negotiate for exclusive licensing terms of two years with one year automatic renewal.

Support to Content Providers

We emphasize cooperating with content providers. We license our standard software development kits and related tool suites for free to our selected developers for them to develop content in our
proprietary format. We have designed our standard software development kits and related tool suites with modularized functions to allow content providers to focus on content creation and improvements without being slowed by concerns over
compatibility with handset hardware, software or network environments. This simplifies our content providers development work and shortens their time-to-market.

Our specialized content provider support team helps content providers better utilize our development tools and speed up their development process. Our field engineers, some of whom are temporarily
stationed at the offices of content providers, assist content providers with project management and other technical aspects of developing applications. We also work with developers to test content before launching it on Maopao. After launching
content, we give suggestions to content providers to improve and upgrade their applications and content based on user feedback. We also provide training to content providers for them to better understand our technical tools. We believe these efforts
facilitate the development process and enhance our relationship with content providers.

We also host events and sponsor
large industry conferences for the content developer community, such as the 3G Application Software Forum we held in Hangzhou in February 2010 and the Global Mobile Internet Conference we sponsored in May 2012. We provide guidance and technical
support to content providers developing content for the 3G network environment, which we believe will help enrich the applications available on Maopao following popularization of the 3G network. We believe our close collaboration with content
providers has positioned us to offer creative and well-integrated digital lifestyle solutions to our users.

Operation of Maopao

We pre-install certain applications and other content on Maopao, and periodically update the applications and content
menu. Our operation team, which consisted of approximately 169 employees as of March 31, 2012, is responsible for managing the operation of applications and other mobile content available on Maopao.

We operate substantially all of the applications and content on Maopao, such as mobile social games, on our network infrastructure of
over 520 computer servers. Our network infrastructure automatically reports any detected malfunctions on a real-time basis to our network control center. This allows us to quickly respond to and resolve issues to ensure the stability and security of
our network.

Our operation team supervises the operation of applications available on Maopao, including complex applications
such as mobile social games. They ensure the proper functioning of wireless connection and data transmission systems and application features, initiate remediation processes once bugs or other defects are detected and provide application updates for
users to download.



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Our operation team also polices against rampant piracy in China, which allows users to
bypass mobile application stores, decrease revenues of store operators, content providers and other industry participants, and damage store operators reputation and credibility among users and industry participants. We regularly analyze the
download and billing records of handsets using Maopao in order to detect piracy.

User Account Management

Users of our Maopao Community applications and content need to register an account with Maopao. Once registered, they have a user name
and password to log in. Our account management system provides us with each individual users log-in, download and other history. With respect to users of our single-user applications and content, we only have statistical user information. We
have also developed a unified account management system for all users of Maopao, which allows our users to access different Maopao products through one account and enables us to track and analyze each individual users behavior and preferences.

Utilizing such information, we can better serve our users by introducing personalized offerings according to each
users preference and taste. To facilitate users transition from the current system, where no log-in is required, to our new account management system, we are introducing a default registration system under which an existing user will be
assigned a default user name and password. Users are encouraged to customize their user names and passwords, and voluntarily provide us with optional personal information such as gender, age, birthday and location.

With each user having his or her own identification, users can better interact with each other. For example, users with similar hobbies
may easily locate each other, share information and recommend applications to each other via Maopao. We believe this account management system will enhance loyalty and create additional demand for applications and content on Maopao.

Customer Service

We believe our emphasis on customer service enhances our brand image and user loyalty. We have a call center and a website forum that
provide real-time assistance to users of Maopao and the applications available in our mobile application store. We believe that we are the only independent mobile application store operator in China that provides customer service via an in-house
call center 24 hours a day, seven days a week, in addition to an outsourced call center. Maopao also displays our customer service contact number and provides a link to our website.

Our customer service representatives are trained to address user inquires, educate users and potential users about Maopao and our
applications and promptly resolve user complaints. We also monitor user complaint and give feedback to content providers to identify potential issues that may need to be addressed. We were granted the China Contact Center Award by China
Electronic Chamber of Commerce in 2009 and the Golden Ear Microphone Award by Customer Care & Management World Group in 2011 for the contact center with the best customer experience.

We ensure service quality by emphasizing personnel selection and regularly monitoring the performance of our representatives. Each
representative completes monthly mandatory training, conducted by experienced managers, on product knowledge, service attitude, complaint handling and communication skills.

Cooperation with Handset Companies

Having Maopao and our applications
embedded in mobile handsets is an important channel to promote Maopao and our content. Mobile network operators in China have limited control over handset sales. End mobile users can choose from hundreds of different brands and thousands of
different models of handsets. In the highly fragmented and competitive handset market in China, the ability to pre-install an application store onto handsets before they reach mobile users is key to a mobile application stores success.



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We have formed strong collaborative relationships with handset companies to embed our
mobile application store for different types of mobile baseband, chipsets and reference designs, e.g. MTK, Spreadtrum, Qualcomm and MStar. We have cooperated with over 860 handset companies as of March 31, 2012. Our collaborators include
branded handset companies such as Aux, Gionee, Chang Hong, K-Touch and Lenovo, as well as independent design houses such as Dewav, Hua Qin and Tian Long. We select handset companies based on their reputation, market share and the strength of their
research and development capabilities. Our agreements with handset companies are generally for two year terms and usually contain automatic renewal provisions.

Contract Terms with Handset Companies

We generally pay handset
companies a percentage of the proceeds we receive from payment channels. In addition to monetary benefits, pre-installing Maopao enhances the features and user experience of mobile handsets and helps promote handset sales. Given our economies of
scale, working with us helps reduce handset companies cost of negotiating with individual content providers and payment processing agents. Such costs may be substantially higher if handset companies use their own or a third-partys mobile
application store with a smaller user base.

Handset companies also generally trust our content selection based on our
analysis of statistical data obtained from an extensive user base and our prediction of market trends and user preferences. We work closely with handset companies to develop new handset functions and optimize the operating environment of individual
handset models. Our knowledge of their handset designs and functions in turn helps us to develop Maopao and our applications to better utilize the hardware and software resources of mobile handsets. We believe we have built a reputation among
handset companies on the strength of our value proposition and our track record in delivering tangible benefits.

Payment Channels

Cooperation with Mobile Service Providers

In the three years ended March 31, 2012, we collected most of our revenues through the billing channels of mobile service providers. After a mobile user confirms that he or she is ready to purchase a
mobile application or content, Maopao will prompt the user to send an SMS to a specified number. A mobile service provider selected by us will send the user a confirmation SMS with transaction details and also send a simultaneous message to the
mobile network operator. When selecting mobile service providers, we usually consider mobile service providers history with us, including their service quality and timeliness of payments. After confirming the transactions have been effected
based on the SMS, the mobile network operator records the transactions and bills the user.

Our relationships with mobile
service providers are critical for us to collect proceeds under the payment process described above. As of March 31, 2012, we had entered into agreements with over 90 mobile service providers, who have access to payment channels provided by
mobile network operators pursuant to their respective agreements. Key service providers we work with include Shenzhen Xunhong, Tom.com, Kongzhong, Sina and Phoenix New Media. We select mobile service providers based on the coverage of the networks
to which they have access, proceeds sharing arrangements and their track record of revenue collection. Our agreements with mobile service providers are generally for one to three year terms without automatic renewal provisions. Certain mobile
service providers, such as Sina, also provide content to Maopao and rely on our distribution channels to promote such content, which further enhances our relationships with them. We generally share with mobile service providers a percentage of the
proceeds they collect, which are net of the fees they pay to mobile network operators. We usually receive settlement statements from mobile service providers, which indicate the aggregate amount of fees that were charged to users for purchases of
applications and content through Maopao.

We rely primarily on mobile service providers for revenue collection and they in
turn depend on mobile network operators to provide billing and collection services for them. Three mobile network operators, China Mobile, China Unicom and China Telecom, dominate the wireless telecommunication sector in China. See Item 3. Key
Information  D. Risk Factors  Risks Related to Our Business and Our Industry  We depend on mobile service providers, and ultimately mobile network operators, for the collection of a substantial majority of our revenues,
and any loss of or deterioration in our relationships with mobile service providers, or a disruption in our mobile service providers relationships with mobile network operators, may result in severe disruptions to our operations and loss of
revenues.



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When mobile service providers sell their applications and content through Maopao, we
usually charge a commission at a fixed percentage of the sales proceeds that the mobile service providers receive.

Cooperation with
Mobile Network Operators

In late 2011, we began to cooperate with China Mobile, the largest Chinese mobile
telecommunications company by market capitalization. Under our cooperation agreements, China Mobile provides billing and collection services to us and we help China Mobile promote its applications, such as its reading application software, through
our mobile application store. Our agreements with China Mobile generally have a one-year term with automatic renewal provisions.

We share a percentage of proceeds collected from our users with China Mobile. When China Mobile sells its applications and content through Maopao, we charge a commission at a fixed percentage of the sales
proceeds that China Mobile receives. For more details, please see Item 3. Key Information  D. Risk Factors  If we fail to maintain cooperative relationships with mobile network operators, our revenues and growth prospects may
be adversely affected.

K Currency and Third-party Payment Channels

In addition to mobile service providers billing channels, we offer our own virtual currency and a variety of third-party payment
options to mobile handset users. In April 2009, we launched our own form of virtual payment, K Currency, to enable users to purchase virtual items in our social network applications and mobile social games in the Maopao Community.
K Currency is the primary form of payment allowed for purchases in the Maopao Community, while purchases of single-user applications and other content are mostly transacted through SMS.

Users can purchase K Currency using game cards of third-party companies such as Giant Interactive, Netease, Perfect World and
Shanda, other prepaid cards, bank remittance, China Post and virtual money such as QQ Currency, among others. For these payment channels, we usually collect through independent payment processing agents and pay a percentage of proceeds to such
agents, which is usually lower than the percentage we pay mobile service providers. Our agreements with the independent payment processing agents are generally for terms of one year with automatic renewal provisions.

Our Maopao Community revenues generated from K Currency have grown significantly, from RMB60.0 million for the fiscal year
2011 to RMB110.5 million (US$17.6 million) for the fiscal year 2012, accounting for 8.9% and 16.1% of our total revenues, respectively.

Sales and Marketing

Brand
Awareness

We have established a branding program, which focuses on raising the awareness of our Maopao
brand which appears on all of our products and services. We believe our existing track record and cooperation with handset companies, content providers, payment channels and mobile network operators have earned us a good reputation among these
industry participants. With our branding program and our efforts to implement a unified account management system to cover all our users, we strive to further enhance market recognition of our brand and user experience associated with our brand.

Handset Users

We aim to increase sales by introducing appealing content to our users, enhancing users purchasing frequency and average transaction amount. Our market research team keeps abreast of the latest
market trends and user preferences by collecting information from handset companies and analyzing user statistical data. On a real-time basis, they provide suggestions for developing new content to our in-house development team and our third-party
content collaborators. We implement innovative marketing and promotion strategies specifically designed for our application store and for each of the main applications we provide. We market and promote Maopao and our applications and other content
to handset users through the following channels.



| |  |  | Affiliate marketing.We jointly promote Maopao and content available thereon with several well-known mobile service providers, which is
generally more cost-effective and wide reaching than our own promotion through traditional advertising. Mobile service providers with their own Internet-based content may promote applications on their respective websites. We have also entered into
cooperation agreements with several mobile service providers and provincial subsidiaries of key mobile network operators to promote mobile applications and other content.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Cross-selling.We promote the cross-selling of the applications and content on the Maopao application store by introducing sales events based on
certain themes and grouping similar applications and content into packages. On Maopao, we also notify users of the applications or content that their friends or contacts use. After users download applications or content, we send information to users
about similar applications and content that may interest them.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Advertising and promotions.We have implemented a Talented User program, under which some of our users who are familiar with Maopao and its
applications and content recommend and promote applications and content to other users in forums that discuss frequently asked questions about Maopao.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior to launching new applications and content, we usually conduct test marketing by offering the content to selected users on a small scale. We gather and analyze user purchasing results and feedback,
focusing on estimated sources of demand, growth potential and acceptable selling prices of the applications and content on the Maopao application store. We adjust our launch and marketing plan based on test marketing results to enhance our marketing
efficiency.

Promotion to Handset Companies

Pre-installing the Maopao application store on mobile handsets is an important channel for us to increase our user base. We were one of the first companies to provide mobile applications to handset
companies for free, which helped establish a critical user mass for Maopao. We emphasize maintaining close relationships with handset companies to increase the number of mobile handsets with the Maopao application store pre-installed. We are also
developing relationships with additional handset companies to extend our reach to potential users.

International Expansion

We are well-equipped to expand into overseas markets with a large number of users of China-manufactured mobile handsets, such as India,
Indonesia and other emerging market countries in Southeast Asia and South America. We have already initiated our expansion efforts in these markets.

We have a dedicated sales team covering each of our major overseas markets and we have translated the user interface of many of our single-player games and other applications into local languages,
including English, Hindi and Thai. In India and Indonesia, we have identified key mobile market participants, including local mobile operators, content providers and handset manufacturers, and will promote our business model to them. We will
continue to leverage our relationships with China-based handset companies to pre-install Maopao onto their handsets for export.

Our
Technologies

Our technologies help us connect the various resources of the mobile application sector and deliver a
superior experience to our users. Our users only need to deal with the standardized and user-friendly interface of Maopao to search, purchase and use the applications and content on Maopao without regard to complications during the interaction among
telecommunication networks, mobile handsets and mobile content. We believe Maopao and related technologies provide practical solutions to problems typically faced by mobile application stores operating in China.

Compatibility with Mobile Handsets

Chinas mobile handset market is characterized by the fragmentation of handset hardware, ranging from low-end handsets designed for basic telecommunication functions to top-of-the-line models. A
successful mobile application store must be compatible with such diversified hardware, as well as a myriad of operating systems and other software available on handsets in China.



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Maopao is designed to be compatible with all mainstream handset development hardware such
as MTK, Spreadtrum, Qualcomm and MStar Semiconductor, and software such as Android, Flash, Nucleus, Brew, TI and Linux, among others, and facilitates the operation of individual applications on various mobile operating systems. With our knowledge of
various handset models in China, obtained through our cooperation with handset design houses and involvement in the handset design process, we are familiar with the advantages and shortcomings of many popular handset models. Maopao and its
applications and content are designed to better utilize the resources of popular handset models hardware and software and bypass system bottlenecks, enhancing the performance of the applications and content.

Compared to a typical Java format mobile application, an application in our proprietary MRP format requires less storage space, roughly
one-third of the size of a Java based file for a similar game or application, and takes only one-sixth of the handset memory space a Java application would take when playing. This makes Maopao and our applications and content more appropriate to run
in the operating environment of mobile handsets.

In order to run smoothly, many of todays sophisticated mobile
applications, especially mobile social games, generally require expensive top-of-the-line hardware for its high computational power and extensive memory space to achieve satisfactory performance. In contrast, Maopao and our applications are designed
to be flexible to allow for effective game play and other user experience even on lower-end handsets. We believe such flexible requirements for handset hardware and software provides us with a competitive advantage and allows us to access a broad
range of users in China.

Connectivity with Mobile Networks

Chinas network environment also presents challenges to mobile application store operators. Each of the three dominant mobile
network operators has dozens of provincial subsidiaries usually running local networks in its respective region. As a result, a national mobile application store operator must deal with scores of different network operating environments. Leveraging
our core development teams experience in telecommunications networking, we have a good grasp of the actual network operating environments in different regions in China, including their actual connectivity, interconnection among different
networks and their respective effective fee standards.

We have designed Maopao to make best use of network resources,
accommodating actual network operating conditions. For example, when users use the applications and content on Maopao, it can automatically detect local network conditions, list network connection alternatives and select the optimized connection
solution. When connecting to a local wireless network that has unique data transmission problems, built-in algorithms on Maopao will minimize data errors during transmission.

Digital Rights Management

Maopao is designed to protect against
piracy. Unlike other application stores that rely on open source software like Java based programs, our proprietary MRP format has built-in encryption features for content-protection and secured billing. Each mobile handset utilizing Maopao has an
individual computing method for its billing records. Even if hackers attack a handset, the impact is usually limited to that specific handset.

Scalable Hardware Infrastructure

Each physical server in our infrastructure network functions as a virtualized central server, which supports simultaneous mobile application access by approximately one million mobile users. We utilize
this technological foundation for mass computing and operational stability, supporting most sophisticated applications such as mobile social games and complicated social network functions.

Single Socket Solution and Easy Upgrade Process

We implement a
single socket solution, which significantly improves wireless data transmission speed and application stability. Unlike certain other mobile application stores that require users to open a socket for each application, our single-socket approach
saves users the time and resources needed for opening and closing different sockets and switching among sockets. Maopao and the cloud computing at our servers allow the operation of several functions concurrently through one socket on a given
handset.



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Maopao also shortens the application upgrade process, which is common for mobile social
games. Users generally have to reload the entire application for such upgrades, which drastically slows down the application and usually frustrates mobile users. Maopao simplifies the upgrade process by requiring reloading only the upgraded part of
the applications, cutting down processing time significantly.

Competition

The mobile application store market in China is competitive. The market is characterized by frequent introduction of new products and
services, short product life cycles, evolving industry standards, regular improvement in performance characteristics, rapid adoption of technological and product advancements, user price sensitivity and aggressive price cutting by competitors with
resulting downward pressure on gross margins. We compete directly with:



| |  |  | other independent application store operators which offer mobile application stores similar to ours, such as NetDragon Websoft Inc., Shenzhen Shenxunhe
Technology Co., Ltd., Shanghai Snowfish Tech. Co., Ltd. and Shanghai Coolbar Co., Ltd.;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | handset companies that have developed their own proprietary application stores, such as iTunes App Store on iPhones from Apple Inc. or the Ovi Store on
Nokia handsets;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | mobile software providers, such as Guangzhou Ucfly Company, which has developed UCWeb, a mobile handset browser;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | emerging mobile operating systems which have their own application stores, such as Android and Windows Phone;
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | mobile network operators that provide their own application stores, such as Monternet Mobile Market from China Mobile and the UNI-Info Platform from
China Unicom; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | large Chinese Internet companies that may develop and operate their own mobile application stores, such as Qihoo 360, Alibaba, Tencent and Baidu.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

We may also face alliances between our existing and new competitors. New competitors may also emerge. For
example, mobile service providers, handset companies or other parties may introduce a mobile application store or other business model to compete with us. In addition, some wireless communication chip manufacturers have launched or plan to launch
their own application stores.

We compete primarily on the basis of user base, relationships with content developers, handset
companies and mobile service providers, key technologies as well as research and development capabilities. For a discussion of risks relating to competition, see Item 3. Key Information  D. Risk Factors  Risks Related to
Our Business and Our Industry  We may face increased competition, which could reduce our market share and materially adversely affect our results of operations.

Intellectual Property

We regard our copyrights, trademarks, trade secrets
and other intellectual property as critical to our success, and rely on trademark and copyright law, trade secret protection and confidentiality and/or license agreements with our employees, suppliers and others to protect our proprietary rights.
Our research and development personnel have entered into confidentiality and proprietary information agreements or clauses with us. These agreements address intellectual property protection issues and require our employees to assign to us all of the
inventions, designs and technologies they develop during their employment.

Licenses from Third Parties

While we develop original applications, a majority of the applications and content offered by Maopao are developed by third parties and
contain intellectual property owned by third parties, including copyrights and trademarks. We enter into agreements with intellectual property owners or their authorized sub-licensors to obtain licenses to use such intellectual property in our
business, such as applications and content launched on Maopao.



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Under the license agreements, we usually pay ongoing license fees through sales proceeds
sharing arrangements. We sometimes pay content developers a minimum guaranteed amount to cover part of their development costs in addition to sharing the sales proceeds. For certain simple applications such as card games, we may make a one-time
payment to content developers for licensing all rights associated with a particular application.

Trademarks, Trade Name, Copyrights and
Domain Names

As of the date of this annual report, we have applied for the registration of the 


LOGO
, 


LOGO
, 


LOGO
, 


LOGO
, and 


LOGO
 trademarks in China. We have obtained 58 copyright registrations for software we developed, including development tools for our MRP format, as well as applications offered on Maopao. In addition, we have
registered 62 domain names, including sky-mobi.com and 51mrp.com, our primary operation websites.

While we actively take
steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of our intellectual property. This is particularly the case in China, where laws may not protect our proprietary rights as fully
as in the United States. Infringement or misappropriation of our intellectual property could materially harm our business. In addition, many parties are actively developing and seeking patent protection for wireless services-related technologies. We
expect these parties to take steps to protect these technologies, including seeking patent protection.

Patents issued or
pending that are held by others may cover significant parts of our technology or business methods. Disputes over rights to these technologies are likely to arise in the future. Our offerings could infringe valid patents, copyrights or other
intellectual property rights held by third parties. We may be subject to legal proceedings and claims from time to time relating to the intellectual property of others, as discussed in Item 3. Key Information  D. Risk
Factors  Risks Related to Our Business and Our Industry  Our results of operations, financial performance and business may be adversely affected by potential intellectual property rights infringement claims against us.

Seasonality

Our results of operations may be affected by seasonal trends caused by user behavior and demand for our applications and content
offerings. We expect our revenues to be higher during holiday periods, when users purchase more applications and other content through our mobile application store. Such seasonality has appeared less prominent in recent periods when we achieved
significant revenue growth, but may become more prominent in the future.

Insurance

We maintain directors and officers liability insurance and do not maintain any property insurance other than insurance for our
transportation vehicles. Consistent with customary industry practice in China, we do not maintain business interruption insurance. Uninsured damage to any of our equipment or buildings or a significant product liability claim could have a material
adverse effect on our results of operations. See Item 3. Key Information  D. Risk Factors  Risks Related to Our Business and Our Industry  We have limited insurance coverage, which could expose us to
significant costs and business disruption.

Regulations

Regulation of the Telecommunications Industry

Telecommunications Services

On September 25, 2000, the State Council of the PRC, or the State Council, issued the Regulations on Telecommunications of the PRC, or the Regulations on Telecommunications, which regulate the
telecommunications industry and related activities and services in the PRC. The MIIT (formerly the Ministry of Information Industry, or the MII) regulates the telecommunications industry on a national level and the relevant provincial-level
communications administrative bureaus, or the CABs, supervise and regulate the telecommunications industry in their respective administrative regions.



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The Regulations on Telecommunications classify telecommunications services into two main
categories: (1) basic telecommunications services and (2) telecommunications value-added services, and further divide each main category into several sub-categories. According to the Catalog for Classification of Telecommunications
Businesses, which became effective on April 1, 2003, our business constitutes provision of information services through mobile networks and the Internet, and is classified in the category of telecommunications value-added services.

The provision of telecommunications value-added services in the PRC is subject to the examination and approval of, and requires a
license issued by, the MIIT or the relevant CABs. On March 1, 2009, the MIIT issued the Administrative Measures for the Licensing of Telecommunications Business Operations, which set forth the basic requirements that an applicant must satisfy
when applying for a license to provide telecommunications value-added services in the PRC. Such requirements include the following:



| |  |  | the applicant is a duly incorporated company;
| | - |  | ---------------------------------------------



| |  |  | the applicant has the necessary funds and professional staff suitable for its business activities;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | the applicant has the reputation or ability to provide customers with long-term services;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | to operate telecommunications value-added services business across two or more provinces, autonomous regions or centrally administered municipalities,
the applicant should have a minimum registered capital of RMB10,000,000; to operate telecommunications value-added services business within one province, autonomous region or centrally administered municipality only, the applicant should have a
minimum registered capital of RMB1,000,000;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the applicant has the necessary premises, facilities and technical scheme; and
| | - |  | ------------------------------------------------------------------------------



| |  |  | the applicant and its major capital contributors and business managers have no record of violating rules of the telecommunication supervision and
administration during the past three years.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Provision of telecommunications value-added services across
two or more provinces, autonomous regions or centrally administered municipalities requires the approval of the MIIT and a Trans-regional Telecommunications Value-added Services Operation License issued by the MIIT. Provision of such services to one
province, autonomous region or centrally administered municipality requires only the approval of the relevant CAB, which will issue a Telecommunications Value-added Services Operation License. We provide our telecommunications services from Zhejiang
province only and we do not have subsidiaries or servers in other parts of China. As such, we only need the approval of the Zhejiang CAB. Each of our controlled SPEs, namely Hangzhou Sky, Mijia and Fanyi has been granted a Telecommunications
Value-added Services Operation License by Zhejiang CAB.

On March 13, 2005, the MII issued the Specifications for
Telecommunications Services, which specify the telecommunications service standards to which telecommunications service providers in the PRC should conform. It also requires telecommunications services providers to establish a sound service quality
management system and make periodic reports to the relevant telecommunications authorities.

Foreign Investments in the
Telecommunications Value-added Services Industry

Foreign direct investment in the telecommunications services industry in
China is regulated by the Regulations on the Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, issued by the State Council on December 11, 2001 and amended by the State Council on September 10,
2008. According to the FITE Regulations, a foreign investors ultimate equity interests in any entity providing telecommunications value-added services in the PRC may not exceed 50% and a foreign investor wishing to acquire any equity interest
in a telecommunications value-added services business in the PRC must demonstrate a good track record and prior experience in providing telecommunications value-added services outside the PRC.

On July 13, 2006, the MII issued the Notice Regarding Strengthening Administration of Foreign Investment in Operating
Telecommunications Value-Added Businesses, or the MII Notice, which prohibits holders of telecommunications value-added services operating licenses, including Trans-regional Telecommunications Value-added Services Operation Licenses and
Telecommunications Value-added Services Operation Licenses, from leasing, transferring or selling their licenses to any foreign investors in any manner, or providing any resources, premises or facilities to any foreign investors for illegal
operation of telecommunications services businesses in the PRC.



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The MII Notice also requires that (1) holders of telecommunications value-added
services operation licenses or their shareholders must directly own the domain names and trademarks used by such license holders in their daily operations; (2) each license holder must have the necessary facilities for its approved business
operations and maintain such facilities in the regions covered by its license and (3) all value-added telecommunications service providers maintain network and Internet security in accordance with the standards set forth in relevant PRC
regulations. If a license holder fails to comply with the requirements in the MII Notice and fails to remedy such non-compliance within a designated period, the MIIT or relevant CABs may take administrative actions against such license holders,
including revoking their telecommunications valued-added services operation licenses. We provide our services through our controlled SPEs that own Telecommunications Value-added Services Operation Licenses.

Regulation of the Software Development Industry

Software Development

On October 16, 2000, the MII, Ministry of
Education, Ministry of Science and Technology and the State Administration of Taxation, or SAT, promulgated the Certifying Standards and Administrative Measures for Software Enterprises (Proposed), which specify the certifying standards of software
enterprises, including:



| |  |  | the applicant must be an enterprise established in the PRC that engages in the business of computer software development and production, system
integration or application service, or similar activities;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the enterprise develops one or more software products or possesses intellectual property rights for such products, or provides technical services such
as computer information system integration that has passed qualification and grade certification;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the proportion of technical staff working in software development and technical service must not be less than 50% of the total staff in the enterprise;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the development fund for software techniques and products must be over 8% of the enterprises annual income from software; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | the annual sale income from software sales must be over 35% of the total annual income of the enterprise, with the income of self-developed software
over 50% of the software sales income.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Enterprises qualified as software enterprises are
entitled to certain preferential policies in the PRC. According to the Circular on Relevant Policies for Encouraging the Development of the Software and Integrated Circuit Industries, or Circular No. 25, issued by the Ministry of Finance
and SAT, newly-established software development enterprises (i.e., those established after July 1, 2001) may be exempted from income tax in the first two years of profitability and pay income taxes at half the standard rate for the next three
years. According to the Circular on Relevant Policies for Further Encouraging the Development of the Software and Integrated Circuit Industries (No. 27 (2012)), issued by the Ministry of Finance, a revised and updated version of Circular
No. 25, enterprises which enjoyed preferential treatment under Circular No. 25 before December 31, 2010 may continue to enjoy preferential treatment until the expiration of the original five-year period.

On February 22, 2008, the Ministry of Finance and SAT promulgated the Notice on Several Preferential Policies in Respect of
Enterprise Income Tax, or Notice 2008 No. 1, reiterating the policy that a software enterprise newly established within China may, upon determination, be exempted from income taxes for its first two profit-making years and will be subject to
income tax at half the standard rate for the next three years. On April 24, 2009, the Ministry of Finance and SAT promulgated the Notice on Several Issues Relevant to the Implementation of the Preferential Policies on Enterprise Income Tax,
which states that software enterprises and integrated circuit production enterprises established prior to the end of 2007 may, upon certification, enjoy the preferential policies on EIT reductions and exemptions within specified periods as provided
in the Notice 2008 No. 1. An enterprise which made profits in 2007 or in the years preceding 2007 and started enjoying the EIT reductions and exemptions within specified periods may enjoy the relevant preferential policies from 2008 until the
expiration of the specified periods.



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The software development enterprise certification is subject to annual examination.
Hangzhou Sky was granted a software enterprise certification on December 14, 2007, and passed the annual inspection for 2008 and 2009. It enjoyed the preferential income tax policy, i.e., income tax exemption for the first two profit-making
years (i.e., 2008 and 2009), and a reduced rate for the next three years.

On March 5, 2009, the MIIT issued the
Administrative Measures for Software Products, or the Measures for Software Products, to regulate the development, production, sale and import of software products, including computer software, software embedded in information systems and equipment,
and computer software provided in conjunction with other information or technology services. The Measures for Software Products forbid the development, production, sale and import of software products that infringe intellectual property rights of
third parties, contain computer viruses, harm computer system security or contain content prohibited by PRC law.

The
Measures for Software Products require registration and filing of software products with provincial level software registration institutions authorized to accept and review software products registration applications. Once accepted for review, the
software product registration application will be publicly announced, and if no objection is received within a seven-working-day publication period, a software registration number and a software product registration certificate will be granted. A
software registration certificate is valid for five years and may be renewed upon expiration.

Foreign Investments in the
Software Development Industry

According to the Catalogue of Industries for Guiding Foreign Investment, amended in 2007,
foreign investment is encouraged in the sector of software development and production. As such, there are no restrictions on foreign investment in the software development industry in the PRC aside from requirements to obtain business licenses and
other permits that every software developer in the PRC must obtain.

Regulation of Intellectual Property Rights

Trademarks

Registered trademarks in the PRC are protected by the Trademark Law of the PRC, which came into effect in 1982 and was revised in 1993 and 2001. A trademark can be registered in the PRC with the Trademark
Office under the State Administration for Industry and Commerce. The protection period for a registered trademark in the PRC is ten years starting from the registration date and may be renewed if an application for renewal is filed within six months
prior to expiration.

Copyright

Copyright in the PRC is protected by the Copyright Law of the PRC, which was promulgated in 1990 and revised in 2001 and 2010. Under the revised Copyright Law, copyright protection extends to information
networks and products transmitted on information networks. Copyrights are reserved by the author, unless otherwise specified by law. According to Article 16 of the Copyright Law, if a work constitutes work for hire, the employer, instead
of the employee, is considered the legal author of the work and will enjoy the copyrights of such work for hire other than rights of authorship.

Works for hire include (1) drawings of engineering designs and product designs, maps, computer software and other works for hire, which are created mainly with the materials and technical
resources of the legal entity or organization with responsibilities being assumed by such legal entity or organization and (2) those works the copyrights of which are, in accordance with the laws or administrative regulations or under
contractual arrangements, enjoyed by a legal entity or organization. The actual creator may enjoy the rights of authorship of such work for hire.

A copyright owner may transfer its copyrights to others or permit others to use its copyrighted works. Use of copyrighted works of others generally requires a license from the copyright owner. The
protection period for copyrights in the PRC varies, with 50 years as the minimum period of protection. The protection period for a work for hire for which a legal entity or organization owns the copyright (except for the right of
authorship) is 50 years, expiring on December 31 of the fiftieth year after the first publication of such work.



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In China, computer software copyrights are protected by the Copyright Law. The State
Council and the State Copyright Administration of the PRC have promulgated various regulations relating to the protection of software copyrights in China. Under these regulations, computer software that is independently developed and exists in a
physical form is protected, and a software copyright owner may license or transfer its software copyrights to others. Registration of software copyrights, exclusive licenses and transfer contracts with the Copyright Protection Center of China
(previously, the State Copyright Administration) or its local branches is encouraged. Although such registration is not mandatory under PRC law, it provides owners with more protection.

Regulation of the Internet

Internet domain names

Internet domain names in the PRC are regulated by the Administrative Measures on the PRC Internet Domain Name, which were
promulgated by the MII and came into effect on December 20, 2004, and the Implementation Rules of Registration of Domain Name, which was promulgated by PRCs domain name registrar, CNNIC, and came into effect on December 1, 2002.

Domain name service organizations accept applications for network domain names and domain name registration applicants
become holders of the registered domain or name after registration. A holder must pay operation fees on time to keep its registered domain name or the domain name registrar may revoke the domain name. In case any registration information of a domain
name changes, the holder must file the change with the domain name registrar within 30 days after such change.

The China
Internet Network Information Centre, or CNNIC, is responsible for the administration of .cn domain names and Chinese domain names. Disputes in respect of domain names are regulated by the Measures on Resolution of Disputes regarding Domain Names,
which was issued by CNNIC and revised on February 14, 2006. Such disputes are settled by organizations approved by the CNNIC.

Provision of Internet Information Services

Provision of Internet
information services in the PRC is regulated by the Administrative Measures on Internet Information Services, adopted by the State Council on September 20, 2000. According to these measures, provision of Internet information services regarding
news, publication, education, medicine and health care, pharmacies and medical appliances is subject to examination, approval and regulation by relevant authorities responsible for regulating these sectors. Electronic bulletin services also require
special applications and filings in accordance with relevant regulations (as described below).

Internet content providers
are not allowed to provide services beyond the scope of the content that has been licensed or registered. The measures also provide a list of prohibited content on the Internet. Internet information service providers are required to monitor and
censor the information on their websites, and when prohibited content is found, they should terminate the transmission immediately, keep relevant records and report the prohibited content immediately to relevant authorities.

According to these measures, commercial Internet information service providers must obtain a License for Internet Content Providers, or
ICP license. Moreover, provision of ICP services in multiple provinces, autonomous regions and centrally administered municipalities may require a trans-regional ICP license.

On February 17, 2011, the MOC issued the Provisional Regulations for the Administration of Internet Culture, or the Internet Culture Regulations, which took effect on April 1, 2011 and replaced
the Provisional Regulations for the Administration of Internet Culture, which were issued by the MOC on May 10, 2003 and were amended on June 2, 2004.

The Internet Culture Regulations apply to entities engaging in activities related to Internet cultural products, including music and video files, network games, animation features and
audiovisual products, performed plays and artwork converted for dissemination via the internet. Pursuant to these regulations, commercial entities are required to apply to the relevant local branch of the MOC for an Internet Culture Operating Permit
if they engage in any of the following types of activities:



| |  |  | the production, duplication, importation, wholesale, retail, leasing or broadcasting of Internet cultural products;
| | - |  | -------------------------------------------------------------------------------------------------------------------



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| |  |  | the dissemination of Internet cultural products on the Internet or transmission thereof to (i) client end devices such as computers, fixed-line or
mobile phones, television sets or gaming consoles and (ii) places offering internet access services, such as internet cafes, for the purpose of browsing, reading, using or downloading such products; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the exhibition or holding of contests related to Internet cultural products.
| | - |  | ----------------------------------------------------------------------------

Online Games

On June 3, 2010, the MOC issued the Tentative Rule on Administration of Online Games, or the Rule on Online Games, effective as of August 1, 2010. According to the Rule on Online Games,
companies that plan to operate online games, issue virtual currency and provide virtual currency transaction services must obtain a license from the provincial counterpart of the MOC. The MOC is responsible for reviewing the content of online games.
Online game operators are also required to establish a self-censorship mechanism and ensure the lawfulness of the content of their games and corporate operations.

Online game operators must provide instructions to users and necessary warnings regarding content, functions and targeted players of online games, and display them conspicuously on their website and in
the games. Online games targeting minors must not include any content which allures minors to imitate behavior undermining public morality or instigate crimes, or any content which is harmful to minors health, such as content depicting terror
or cruelty.

Online game operators must take technical measures to prevent minors from accessing unsuitable games or game
functions, restrict minors playing time and prevent minors from becoming addicted to online games. Online game operators must require Internet users to go through an identity registration process with valid identification and online game
operators must keep such registration information. In addition, the Rule on Online Games prohibits providers of virtual currency transaction services from offering these services to minors.

On July 1, 2011, GAPP, the Central Civilization Office, Ministry of Education, Ministry of Public Security, MIIT, the Central
Committee of the Communist Youth League, All-China Womens Federation and China National Committee for the Wellbeing of the Youth issued the Notice on the Initiation of the Real-name Verification of the Anti-addiction System for Online Games,
or the Notice on Online Games, effective as of October 1, 2011. According to the Notice on Online Games, the Identity Inquiry Center of the Ministry of Public Security, or the Identity Inquiry Center, is responsible for the verification of
online users identities and all online games companies must cooperate with the Identity Inquiry Center and satisfy all applicable requirements.

Dividend Distribution

The principal regulations governing
distribution of dividends of wholly foreign-owned enterprises include the Foreign-invested Enterprise Law promulgated by the Standing Committee of the National Peoples Congress, as amended on October 31, 2000, and the Implementation Rules
of the Foreign-invested Enterprise Law issued by the State Council, as amended on April 12, 2001.

Under these laws and
regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, foreign-invested enterprises in China are
required to allocate at least 10% of their respective net profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. Foreign-invested enterprises are not allowed to
distribute profits until deficits of previous fiscal years have been made up.



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Foreign Currency Exchange

The principal regulations governing foreign currency exchange in the PRC are the Foreign Exchange Administration Regulations promulgated
by the State Council, as amended on August 5, 2008, or the Foreign Exchange Regulations. Under the Foreign Exchange Regulations, RMB are freely convertible for current account items, as long as true and lawful transaction basis is provided, but
not for capital account items, such as capital transfers, direct investments, loans, repatriation of investments and investments in securities and derivatives outside of the PRC, unless the prior approval of the State Administration of Foreign
Exchange, or SAFE, is obtained and prior registration with SAFE is made.

On December 25, 2006, the Peoples Bank
of China issued the Administration Measures on Individual Foreign Exchange Control and SAFE issued its Implementation Rules on January 5, 2007, both of which became effective on February 1, 2007. Under these regulations, all foreign
exchange matters involved in employee stock ownership plans, stock option plans and other similar plans participated in by onshore individuals must be transacted upon approval from SAFE or its authorized branch.

On March 28, 2007, SAFE promulgated the Operating Procedures for Administration of Domestic Individuals Participating in the
Employee Stock Option Plan or Stock Option Plan of An Overseas Listed Company, or Circular 78. Under Circular 78, PRC citizens who participate in stock incentive plans or equity compensation plans of an overseas publicly listed company are required,
through a PRC agent or PRC subsidiaries of such overseas publicly-listed company, to complete certain foreign exchange registration procedures with respect to the plans upon the examination by, and approval of, SAFE.

On August 29, 2008, SAFE issued the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of
the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular No. 142. Pursuant to SAFE Circular No. 142, RMB-converted capital invested by a foreign-invested enterprise must be used within the
enterprises business scope as approved by the examination and approval authority, and cannot be used to make equity investments in China unless otherwise provided for in the enterprises business scope. Documents certifying the purposes
of RMB converted from foreign capital, including a business contract, must be submitted for such conversion.

In addition,
SAFE strengthened its oversight of the flow and use of RMB-converted capital invested by a foreign-invested enterprise. The use of such RMB capital may not be altered without SAFEs approval, and such RMB capital may not in any case be used to
repay an existing RMB loan if the proceeds of such loan have not been used. Furthermore, on November 19, 2010, SAFE issued the Notice on Strengthening the Administration of Foreign Exchange, or Notice No. 59, which requires the
authenticity of settlement of net proceeds from offshore offerings to be closely examined and the net proceeds to be used in the manner described in the offering documents. Violations of SAFE Circular No. 142 and Notice No. 59 could result
in severe monetary or other penalties.

Offshore Financing

On October 21, 2005, SAFE issued Relevant Issues Concerning Foreign Exchange Control on Domestic Residents Corporate Financing
and Roundtrip Investment Through Offshore Special Purpose Vehicles, or Circular 75, which became effective as of November 1, 2005. Circular 75 requires PRC residents to register with the local SAFE branch before establishing or controlling any
company outside of China for the purpose of capital financing with assets or equities of PRC companies, or an offshore special purpose vehicle.

PRC residents that are shareholders or beneficial owners of offshore special purpose vehicles established before November 1, 2005 were required to register with the local SAFE branch before
March 31, 2006. In addition, any PRC resident that is a shareholder of an offshore special purpose vehicle is required to amend its SAFE registration with respect to that offshore special purpose company in connection with any increase or
decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China or other material changes in share capital.

In May 2007, SAFE issued guidance to its local branches with respect to the process for SAFE registration, which standardized more
specific and stringent supervision on the registration relating to Circular 75. SAFE issued a series of subsequent rules, including the Notice on Printing and Distributing the Implementing Rules for the Administration of Foreign Exchange in
Fund-Raising and Round-Trip Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Circular 19, which became effective on July 1, 2011. Circular 75 and these implementing rules require PRC residents and
PRC enterprises to register or file with relevant PRC government authorities their direct or indirect offshore investment activities, round-trip investments in the PRC conducted through an offshore entity and subsequent changes in their share
capital.



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We have requested our shareholders and beneficial owners to disclose whether they or their
shareholders or beneficial owners fall within the scope of Circular 75 and urge those who are PRC residents to register with the local SAFE branch as required under Circular 75. However, we cannot provide any assurance that all of our shareholders
and beneficial owners who are PRC residents will comply with our request to make, obtain or update any applicable registrations or comply with other requirements required by Circular 75 or other related rules. In case of any non-compliance on any of
our PRC resident shareholders or beneficial owners, our PRC subsidiaries and such shareholders and beneficial owners may be subject to fines and other legal sanctions, including restrictions on our ability to contribute additional capital to our PRC
subsidiaries and our PRC subsidiaries ability to distribute dividends to our offshore holding companies, which may adversely affect our business.

Overseas Listing

On August 8, 2006, six PRC regulatory
agencies, namely the Ministry of Commerce, SAT, the State Administration for Industry and Commerce, the CSRC and SAFE, jointly adopted the M&A Rule, which became effective on September 8, 2006. The M&A Rule, as amended by the Ministry
of Commerce on June 22, 2009, requires offshore special purpose vehicles that are controlled by PRC companies or residents and that have been formed for the purpose of seeking a public listing on an overseas stock exchange through acquisitions
of PRC domestic companies or assets to obtain CSRC approval prior to publicly listing their securities on an overseas stock exchange.

On September 21, 2006, the CSRC published a notice on its website specifying the documents and materials that special purpose vehicles are required to submit when seeking CSRC approval for their
listings outside of China. The interpretation and application of the M&A Rule remain unclear, and our initial public offering might have required approval from the CSRC. If it did, it is uncertain how long it will take us to obtain the approval.
If CSRC approval was required for our initial public offering, our failure to obtain or delay in obtaining the CSRC approval would subject us to sanctions imposed by the CSRC and other PRC regulatory agencies, which could include fines and penalties
on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially adversely affect our business, results of operations and financial condition.

Our PRC counsel, Jincheng Tongda & Neal Law Firm, has advised us that, based on their understanding of current PRC laws,
regulations and rules and the procedures announced on September 21, 2006, because (i) we established our PRC subsidiaries by means of direct investment other than by merger or acquisition of the equity or assets of PRC domestic companies,
and (ii) there is no provision in the M&A Rule that classifies our contractual arrangements with Hangzhou Sky and Mijia as the acquisition of Hangzhou Sky and Mijia, we were not required to apply to the CSRC for the approval of the listing
and trading of our ADSs on the NASDAQ Global Market. However, following the State Councils decision to establish the security review system for mergers and acquisitions of domestic enterprises by foreign investors on February 3, 2011, the
Ministry of Commerce promulgated the Regulations on Implementing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors on August 25, 2011, or the Security Review System Regulations, which
specifically prohibits foreign investors from using contractual control to circumvent the aforesaid security review.

Although at present the Security Review System Regulations cannot be regarded as a valid basis for the interpretation of the M&A
Rule, substantial uncertainties exist regarding how to interpret and implement the M&A Rule and the opinions of our PRC counsel summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations
in any form relating to the M&A Rule. We cannot assure you that the relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC counsel.



|C. | Organizational Structure
|-- | ------------------------

The following diagram illustrates our shareholding and corporate structure and the place of incorporation of each of our subsidiaries and
SPEs as of the date of this annual report. For a listing of all of our significant subsidiaries and SPEs as of the date of this annual report, see Exhibit 8.1 filed herewith.



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LOGO

LOGO
        Direct Ownership

LOGO
        Contractual arrangements: See   Contractual Arrangements with Hangzhou Sky and its Shareholders,   Contractual Arrangements with Mijia and its
Shareholders,   Contractual Arrangements with Fanyi and its Shareholders,   Contractual Arrangements with Feineng and its Shareholders and   Contractual Arrangements with Hangzhou Investment and
its Shareholder.



|(1) | Sequoia Capital China II, L.P., Sequoia Capital China Principals Fund II, L.P. and Sequoia Capital China Partners Fund II, L.P., together, the Sequoia Funds,
collectively own 33,389,800 common shares.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Feineng is our SPE in China and is currently 60% owned by Mr. Michael Tao Song, our founder, chairman and chief executive officer, and 40% owned by Mr. Li Ou,
our chief technology officer.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Mijia is one of our SPEs in China and is currently 46.4% owned by Mr. Michael Tao Song, 23.2% owned by Mr. Li Ou, 9.28% owned by Mr. Yan Tang, our
terminal technology director, 0.87% owned by Mr. Qing Yan, our chief operating officer, and the remaining 20.25% owned by seven of our employees.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Hangzhou Sky is our SPE in China and is currently 80% owned by Mijia and 20% owned by Ms. Qinyi Zhu, wife of Mr. Michael Tao Song.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(5) | Fanyi is our SPE in China and is currently 75% owned by Mr. Michael Tao Song and 25% owned by Mr. Tao Yang, an employee of an affiliate of the Sequoia Funds.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Hangzhou Investment is our SPE in China and is currently 100% owned by Mr. Michael Tao Song.
|--- | --------------------------------------------------------------------------------------------

We have entered into contractual arrangements with Hangzhou Sky, Mijia, Fanyi, Feineng, Hangzhou Investment and their respective
shareholders through which we exercise effective control over the operations of these entities and receive the economic benefits of the shareholders equity interests in these entities. As a result of these contractual arrangements, under IFRS,
we are considered the primary beneficiary of Hangzhou Sky, Mijia, Fanyi, Feineng and Hangzhou Investment and thus consolidate their results in our consolidated financial statements. See Item 3. Key Information  D. Risk Factors 
Risks Related to Doing Business in China  If the PRC government determines that the contractual arrangements that establish the structure for operating our business do not comply with applicable PRC laws and regulations, we could be subject to
severe penalties.



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Contractual Arrangements with Hangzhou Sky and its Shareholders

Our relationships with Hangzhou Sky and its shareholders are governed by a series of contractual arrangements. Under PRC law, each of
Hangzhou Sky and Dianneng is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Hangzhou Sky and Dianneng, Hangzhou Sky is not required
to transfer any funds generated from its operations to Dianneng.

Service Agreements. Hangzhou Sky and Dianneng
have entered into the following service agreements: a technical support service agreement, a strategy consulting service agreement and an intellectual property license agreement, under which Hangzhou Sky engages Dianneng as its exclusive provider of
technical support and strategy consulting services and Dianneng agrees to grant to Hangzhou Sky a non-exclusive and non-transferable license to use certain intellectual property owned by it for Hangzhou Skys businesses. Hangzhou Sky pays
Dianneng service fees and royalties as determined by Dianneng based on the services provided and the actual use of the intellectual property, respectively. Dianneng owns any intellectual property created or obtained by Hangzhou Sky under the
strategy consulting service agreement. Each service agreement has a term of 10 years or 20 years and will be automatically renewed unless earlier terminated by Dianneng upon 30 days prior notice to Hangzhou Sky, except that the intellectual property
license agreement is renewable upon the written consent of both parties.

Equity Pledge Agreement. Hangzhou Sky
and its shareholders, Mijia and Ms. Qinyi Zhu, have entered into an equity pledge agreement with Dianneng, under which the shareholders of Hangzhou Sky pledged all of their equity interests in Hangzhou Sky to Dianneng as collateral for all of
Hangzhou Skys payments due to Dianneng under the above service agreements. If any event of default as defined under this agreement occurs, Dianneng, as pledgee, will be entitled to dispose of the pledged equity interests in certain ways,
including by negotiating with such shareholders for the transfer of the pledged equity interests. This agreement will terminate when all the amounts payable by Hangzhou Sky to Dianneng under the service agreements have been fully paid and Hangzhou
Sky has fulfilled its obligations under the service agreements.

Purchase Option and Cooperation Agreement.
Hangzhou Sky and its shareholders have entered into a purchase option and cooperation agreement with Dianneng, under which the shareholders of Hangzhou Sky irrevocably granted to Dianneng or its designee an exclusive option to purchase their equity
interests in Hangzhou Sky or all or a part of the assets owned by Hangzhou Sky at a purchase price equal to their respective initial contributions to the registered capital of Hangzhou Sky.

Dianneng may exercise such option at any time. In addition, Hangzhou Sky and its shareholders agree that without Diannengs
consent, Hangzhou Sky will not sell, transfer, mortgage or otherwise dispose of any of its assets, business or beneficial interests, engage in any transactions that could substantially affect its assets, liabilities, operations, equity interests or
other legal rights, or declare any dividend, unless all the equity interests in or assets of Hangzhou Sky have been transferred to Dianneng pursuant to the option under this agreement. This agreement remains effective until terminated by Dianneng
upon 30 days prior notice to the other parties.

Powers of Attorney. The shareholders of Hangzhou Sky have
executed a power of attorney to irrevocably grant to Dianneng or its designee the power of attorney to exercise all of their rights as shareholders of Hangzhou Sky, including the right to appoint and elect board members and senior management members
and other voting rights. Each power of attorney has a term of 20 years.

Contractual Arrangements with Mijia and its Shareholders

Our relationships with Mijia and its shareholders are governed by a series of contractual arrangements. Under PRC law,
each of Mijia and Dianneng is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Mijia and Dianneng, Mijia is not required to transfer
any funds generated from its operations to Dianneng.



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Service Agreements. Mijia and Dianneng have entered into the following
service agreements: a technical support service agreement, a strategy consulting service agreement and an intellectual property license agreement, under which Mijia engages Dianneng as its exclusive provider of technical support and strategy
consulting services and Dianneng agrees to grant to Mijia a non-exclusive and non-transferable license to use certain intellectual property owned by it for Mijias businesses. Mijia pays Dianneng service fees and royalties as determined by
Dianneng based on the services provided and the actual use of the intellectual property, respectively. Dianneng owns any intellectual property created or obtained by Mijia under the strategy consulting service agreement. Each service agreement has a
term of 10 years or 20 years and will be automatically renewed unless earlier terminated by Dianneng upon 30 days prior notice to Mijia, except that the intellectual property license agreement is renewable upon the written consent of both parties.

Equity Pledge Agreement. Mijia and its shareholders, Mr. Tao Song, Mr. Li Ou, Mr. Yan Tang,
Mr. Zhiyi Xia, Ms. Zi Jin, Mr. Guoping Qu, Mr. Wenjie Wu, Mr. Zhe Wang, Mr. Wanyan Shao, Mr. Qing Yan and Mr. Rui Zeng, have entered into an equity pledge agreement with Dianneng, under which the shareholders
of Mijia pledged all of their equity interests in Mijia to Dianneng as collateral for all of Mijias payments due to Dianneng under the above service agreements. If any event of default as defined under this agreement occurs, Dianneng, as
pledgee, will be entitled to dispose of the pledged equity interests in certain ways including by negotiating with such shareholders for the transfer of the pledged equity interests. This agreement will terminate when all the amounts payable by
Mijia to Dianneng under the service agreements have been fully paid and Mijia has fulfilled its obligations under the service agreements.

Purchase Option and Cooperation Agreement. Mijia and its shareholders have entered into a purchase option and cooperation agreement with Dianneng, under which the shareholders of Mijia
irrevocably granted to Dianneng or its designee an exclusive option to purchase their equity interests in Mijia or all or a part of the assets owned by Mijia at a purchase price equal to equal to their respective initial contributions to the
registered capital of Mijia.

Dianneng may exercise such option at any time. In addition, Mijia and its shareholders agree
that without Diannengs consent, Mijia will not sell, transfer, mortgage or otherwise dispose of any of its assets, business or beneficial interests, engage in any transactions that could substantially affect its assets, liabilities,
operations, equity interests or other legal rights, or declare any dividend, unless all the equity interests in or assets of Mijia have been transferred to Dianneng pursuant to the option under this agreement. This agreement remains effective until
terminated by Dianneng upon 30 days prior notice to the other parties.

Powers of Attorney. The shareholders of
Mijia have executed a power of attorney to irrevocably grant to Dianneng or its designee the power of attorney to exercise all of their rights as shareholders of Mijia, including the right to appoint and elect board members and senior management
members and other voting rights. Each power of attorney has a term of 20 years.

Contractual Arrangements with Fanyi and its Shareholders

Our relationships with Fanyi and its shareholders are governed by a series of contractual arrangements. Under PRC law,
each of Fanyi and Dianneng is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Fanyi and Dianneng, Fanyi is not required to transfer
any funds generated from its operations to Dianneng.

Exclusive Business Cooperation Agreement. Under the
exclusive business cooperation agreement between Fanyi and Dianneng, Fanyi engages Dianneng as its exclusive provider of technical and business support and consulting services and pays Dianneng service fees. Dianneng exclusively owns any
intellectual property arising from the performance of this agreement. This agreement has a term of 10 years unless earlier terminated by Dianneng upon 30 days prior written notice or renewed by Dianneng before the expiration of this agreement.

Equity Pledge Agreement. Fanyi and its shareholders, Mr. Tao Song and Mr. Tao Yang, have entered
into an equity pledge agreement with Dianneng, under which the shareholders of Fanyi pledged all of their equity interests in Fanyi to Dianneng as collateral for all of Fanyis payments due to Dianneng under the above exclusive business
cooperation agreement. If any event of default as defined under this agreement occurs, Dianneng, as pledgee, will be entitled to dispose of the pledged equity interests. This agreement will terminate after the consulting and service fees and other
expenses under the business cooperation agreements have been fully paid and Fanyi has fulfilled its obligations thereunder.

Exclusive Purchase Option Agreement. Fanyi and its shareholders have entered into an exclusive purchase option agreement
with Dianneng, under which the shareholders of Fanyi irrevocably granted to Dianneng or its designee an exclusive option to purchase their equity interests in Fanyi at a purchase price equal to the amount of the registered capital of Fanyi actually
contributed for the equity interest to be purchased.

Dianneng may exercise such option at any time and may choose to pay the
above purchase price through cancelling the loan owed to it by Fanyis shareholders under the loan agreements described below and thus will not need to pay any additional amount. In addition, Fanyi and its shareholders agree that without
Diannengs consent, Fanyi will not engage in certain transactions including selling, transferring, mortgaging or otherwise disposing of any of its assets, businesses or beneficial interests or declaring any dividend. This agreement has a term
of 10 years and is renewable at Diannengs sole discretion.



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Loan Agreements. Each shareholder of Fanyi has entered into two loan
agreements with Dianneng. Under these loan agreements, Dianneng lent RMB7.5 million (US$1.1 million) and RMB2.5 million (US$0.4 million) to Mr. Tao Song, one of Fanyis shareholders, solely for him to provide such funds to Fanyi for
business development and a capital increase. Each loan has a term of 10 years, which can be extended upon written consent of the parties thereto. Mr. Song shall, at Diannengs discretion, repay the loan by transferring his equity interests
in Fanyi to Dianneng or its designated third party according to the above exclusive purchase option agreement.

The part of
the purchase price under the exclusive purchase option agreement which exceeds the principal under this loan agreement shall be regarded as interest on this loan and shall be paid to Dianneng by Fanyi. Dianneng can only request Mr. Tao Yang,
the other shareholder of Fanyi, to repay the loan by transferring his equity interest in Fanyi to Dianneng or Diannengs designated third party and the share transfer price shall settle the principal and interest incurred under the loan.

Powers of Attorney. The shareholders of Fanyi have executed a power of attorney to irrevocably grant to
Dianneng or its assignee the power of attorney to exercise all of their rights as shareholders of Fanyi, including the right to appoint board members and senior management members, other voting rights and the right to sell, transfer, pledge or
otherwise dispose of all or a part of their equity interests in Fanyi.

Contractual Arrangements with Feineng and its Shareholders

Our relationships with Feineng and its shareholders are governed by a series of contractual arrangements. Under PRC law,
each of Feineng and Dianneng is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Feineng and Dianneng, Feineng is not required to
transfer any funds generated from its operations to Dianneng.

Service Agreements. Feineng and Dianneng have
entered into the following service agreements: a technical support service agreement, a strategy consulting service agreement and an intellectual property license agreement, under which Feineng engages Dianneng as its exclusive provider of technical
support and strategy consulting services and Dianneng agrees to grant to Feineng a non-exclusive and non-transferable license to use certain intellectual property owned by it for Feinengs businesses. Feineng pays Dianneng service fees and
royalties as determined by Dianneng based on the services provided and the actual use of the intellectual property, respectively. Dianneng owns any intellectual property created or obtained by Feineng under the strategy consulting service agreement.
Each service agreement has a term of 10 years or 20 years and will be automatically renewed unless terminated by Dianneng upon 30 days prior notice to Feineng, except that the intellectual property license agreement is renewable upon the written
consent of both parties.

Equity Pledge Agreement. Feineng and its shareholders, Mr. Tao Song and
Mr. Li Ou, have entered into an equity pledge agreement with Dianneng, under which the shareholders of Feineng pledged all of their equity interests in Feineng to Dianneng as collateral for all of Feinengs payments due to Dianneng under
the above exclusive business cooperation agreement. If any event of default as defined under this agreement occurs, Dianneng, as pledgee, will be entitled to dispose of the pledged equity interests. This agreement will terminate when all the amounts
payable by Feineng to Dianneng under the service agreements have been fully paid and Feineng has fulfilled its obligations under the service agreements.

Purchase Option and Cooperation Agreement. Feineng and its shareholders have entered into a purchase option and cooperation agreement with Dianneng, under which the shareholders of Feineng
irrevocably granted to Dianneng or its designee an exclusive option to purchase their equity interests in Feineng or all or a part of the assets owned by Feineng at a purchase price equal to their initial contribution of the registered capital of
Feineng.

Dianneng may exercise such option at any time. In addition, Feineng and its shareholders agree that without
Diannengs consent, Feineng will not sell, transfer, mortgage or otherwise dispose of any of its assets, business or beneficial interests, engage in any transactions that could substantially affect its assets, liabilities, operations, equity
interests or other legal rights, or declare any dividend, unless all the equity interests in or assets of Feineng have been transferred to Dianneng pursuant to the option under this agreement. This agreement remains effective until terminated by
Dianneng upon 30 days prior notice to the other parties.

Powers of Attorney. The shareholders of Feineng have
executed a power of attorney to irrevocably grant to Dianneng or its designee the power of attorney to exercise all of their rights as shareholders of Feineng, including the right to appoint and elect board members and senior management members and
other voting rights. Each power of attorney has a term of 20 years.



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Contractual Arrangements with Hangzhou Investment and its Shareholder

Our relationships with Hangzhou Investment and its shareholder are governed by a series of contractual arrangements. Under PRC law, each
of Hangzhou Investment and Tiandian is an independent legal person and neither of them is exposed to liabilities incurred by the other party. Other than pursuant to the contractual arrangements between Hangzhou Investment and Tiandian, Hangzhou
Investment is not required to transfer any funds generated from its operations to Tiandian.

Service
Agreements. Hangzhou Investment and Tiandian have entered into the following service agreements: a technical support service agreement, a strategy consulting service agreement and an intellectual property license agreement, under which
Hangzhou Investment engages Tiandian as its exclusive provider of technical support and strategy consulting services and Tiandian agrees to grant to Hangzhou Investment a non-exclusive and non-transferable license to use certain intellectual
property owned by it for Hangzhou Investments businesses. Hangzhou Investment shall pay to Tiandian service fees and royalties as determined by Tiandian based on the services provided and the actual use of the intellectual property,
respectively. Tiandian shall own any intellectual property created or obtained by Hangzhou Investment under the strategy consulting service agreement. Each service agreement has a term of 10 years or 20 years and will be automatically renewed unless
terminated by Tiandian upon 30 days prior notice to Hangzhou Investment, except that the intellectual property license agreement is renewable upon the written consent of both parties.

Equity Pledge Agreement. Hangzhou Investment and its shareholder, Mr. Tao Song, have entered into an equity pledge
agreement with Tiandian, under which Mr. Song pledged all of his equity interests in Hangzhou Investment to Tiandian as collateral for all of Hangzhou Investments payments due to Tiandian under the above service agreements. If any event
of default as defined under this agreement occurs, Tiandian, as pledgee, will be entitled to dispose of the pledged equity interests. This agreement will terminate when all the amounts payable by Hangzhou Investment to Tiandian under the service
agreements have been fully paid and Hangzhou Investment has fulfilled its obligations under the service agreements.

Purchase Option and Cooperation Agreement. Hangzhou Investment and its shareholder, Mr. Tao Song, have entered into a
purchase option and cooperation agreement with Tiandian, under which Mr. Song irrevocably granted to Tiandian or its designee an exclusive option to purchase his equity interests in Hangzhou Investment or all or a part of the assets owned by
Hangzhou Investment at the purchase price equal to the amount of the registered capital of Hangzhou Investment or the corresponding part thereof.

Tiandian may exercise such option at any time. In addition, Hangzhou Investment and Mr. Song agree that without Tiandians consent, Hangzhou Investment will not sell, transfer, mortgage or
otherwise dispose of any of its assets, business or beneficial interests, engage in any transactions that could substantially affect its assets, liabilities, operations, equity interests or other legal rights, or declare any dividend, unless all the
equity interests in or assets of Hangzhou Investment have been transferred to Tiandian through exercising of the option under this agreement. This agreement remains effective until terminated by Tiandian upon 30 days prior notice to the other
parties.

Powers of Attorney. Mr. Tao Song, the shareholder of Hangzhou Investment, has executed a power
of attorney to irrevocably grant to Tiandian or its designee the power of attorney to exercise all of his rights as a shareholder of Hangzhou Investment, including the right to appoint and elect board members and senior management members and other
voting rights. This power of attorney has a term of 10 years.



|D. | Property, Plant and Equipment
|-- | -----------------------------

Our principal executive offices are located at 10/F, Building B, United Mansion, No. 2, Zijinghua Road, Hangzhou, Zhejiang 310013, Peoples Republic of China. We also maintain offices
at other addresses in Beijing, Shanghai and Shenzhen under leases with terms ranging from one year to less than three years. In aggregate, we maintained a total of approximately 8,000 square meters of office space as of March 31, 2012. We lease
our facilities from independent third-parties and do not own any real property.



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The following table sets forth a summary of our material leases as of March 31, 2012:



|         |  |                          |       |  |                   |                            |            |            
|-------- |  | ------------------------ | ----- |  | ----------------- | -------------------------- | ---------- | -----------
|Location |  | Space (in square meters) |       |  | Usage of Property |                            | Expiration
|Hangzhou |  |                          | 3,112 |  |                   | Principal Executive Office |            | May 2015   
|         |  |                          | 3,112 |  |                   | Office                     |            | May 2015   
|Beijing  |  |                          | 600   |  |                   | Office                     |            | May 2012*  
|Shanghai |  |                          | 248   |  |                   | Office                     |            | June 2014  
|         |  |                          | 347   |  |                   | Office                     |            | August 2013



|* | We have renewed the lease agreement for an additional one-year term ending May 2013.
|- | ------------------------------------------------------------------------------------

We believe that our leased facilities are adequate to meet our needs for the foreseeable future, and that we will be able to obtain
adequate facilities, principally through leasing of additional properties, to accommodate our future expansion.



|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- | --------------------------------------------

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in
this annual report. This report contains forward-looking statements. See  H. Safe Harbor. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements,
which involve risks and uncertainties. In evaluating our business, you should also carefully consider the information provided under the caption Item 3. Key Information  D. Risk Factors in this annual report.



|A. | Operating Results
|-- | -----------------

Overview

We operate the leading mobile application store in China, measured by revenues in 2010, according to the 2011 Analysys
Report. On our Maopao application store, users can browse, download and purchase a wide range of applications and content, such as single-player games, mobile music and books. In addition, we have established a leading mobile social network
community in China, the Maopao Community, where we operate mobile social games and provide applications and content with social network functions to our registered members. We target the feature phone market, the largest mobile phone segment in
China, according to the 2011 Analysys Report. We collaborate with handset companies to pre-install Maopao on mobile handsets before shipment. From January 1, 2007 to March 31, 2012, Maopao had approximately 977 million cumulative
users. Over the same period, we offered over 2,070 applications and over 133,400 content titles in our Maopao application store and the cumulative number of downloads reached 8.4 billion.

We generate revenues primarily through users purchases of the applications and content offered on the Maopao application store.
Third-party content providers develop a majority of these applications and content, with the remainder developed by us in-house. We collect payments primarily through mobile service providers, which utilize mobile network operators billing
channels to collect payment for users purchases on Maopao. Since March 2010, we have also been working with independent payment processing agents to collect user payments through a variety of payment channels, including prepaid cards, bank
remittance and online payments.

Through these third-party payment channels, our users can deposit funds into accounts they
register with us and then use such funds to purchase mobile applications and other content through our virtual currency, the K Currency. Currently only registered members of our Maopao Community purchasing virtual items in mobile social games
and social network applications in the Maopao Community can pay through K Currency. Although we have not historically collected a significant portion of our sales proceeds through K Currency, the use of K Currency among our users has
increased in connection with the growth of our registered membership base in the Maopao Community.



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We share sales proceeds from Maopao with handset companies, content providers and payment
service providers. Costs associated with payments under such sharing arrangements with these industry participants account for most of our cost of revenues.

We have grown substantially since we launched Maopao in 2006. Approximately 1,613.9 million, 3,331.8 million and 3,448.7 million downloads of applications and content titles from Maopao
occurred in the fiscal years ended March 31, 2010, 2011 and 2012, respectively. We have also established an active user base in the Maopao Community, where the number of registered members increased from approximately 20.4 million as of
March 31, 2010 to approximately 170.6 million as of March 31, 2012.

Factors Affecting Our Results of Operations

We have benefited from general conditions affecting the mobile applications industry in China, including overall economic
growth, which has resulted in increases in disposable income and discretionary consumer spending; government and industry initiatives accelerating the technological advancement and growth of the mobile handset and mobile applications industry; the
growing popularity of and increasing reliance on mobile handsets for communication needs, sourcing of information and entertainment; and favorable demographic trends, particularly increasing urbanization of young people, who are more inclined to use
mobile applications and content. These general conditions will continue to affect our results of operations.

The following
specific factors also affect our results of operations:

The continued growth of Chinas mobile handset industry

A primary factor impacting our revenues is the sales volume of mobile handsets in China. While smart phones are
gaining popularity in China due to their declining retail prices, which challenges feature phones dominant market position in the Chinese handset market, feature phones maintain their appeal in the low-price handset market. Feature phones
still represent the majority of the Chinese handset market measured by the Chinese mobile handset installed base. According to the 2011 Analysys Report, feature phones are expected to continue to dominate the Chinese handset market for the next two
years.

The 2011 Analysys Report forecasts that market demand for feature phones will continue to be strong, and feature
phones will reach 679 million units in 2013, representing 58.4% of the overall mobile handset market in China. We believe the feature phone market presents a number of opportunities, particularly in the low-price market sector.

Another factor that may drive the growth of our business is the growth of the domestic mobile handset industry in China, which has
developed rapidly in recent years. In 2010, domestic handsets had 47% of the overall market in China in terms of sales volumes, according to the 2011 Analysys Report. The growth of the domestic mobile handset market makes mobile handsets more
affordable to a wider variety of people and enables more low-end mobile handset users to replace their mobile phones at relatively low costs. This group of mobile users typically pays greater attention to mobile handsets performance-to-price
ratio and tends to be attracted to the entertainment functions of mobile phones. We believe that the mobile entertainment industry will benefit from the increase in the number of low-cost domestic mobile handsets in China.

Our ability to increase the installed base of our application stores

Our results of operations significantly depend on the overall size of our user base, which in turn depend on the size of the installed
base of our Maopao application store and demand for handsets manufactured by handset companies that pre-install the Maopao application store. In addition to focusing on the feature phone market, in April 2010 and May 2012, we launched new versions
of Maopao for smart phones that run on the Symbian operating system and Androids operating system, respectively.

The
fast growth of the Chinese handset market is characterized by fragmentation and rapid innovation in design and functionality. We believe our success depends on the growth of the feature phone market, the successful development of our new mobile
application stores for smart phones and our ability to maintain and enhance our relationships with handset companies and establish cooperation with additional handset companies, particularly those with substantial market share or high growth
potential.



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As of March 31, 2012, we had pre-installation arrangements with over 860 handset
companies and from January 1, 2007 to March 31, 2012, Maopao had approximately 977 million cumulative users. Our large user base among feature phone users has contributed to our revenue growth and has solidified our position in the
mobile application sector. We are also developing a version of Maopao that can be downloaded over the air to handsets, including some smart phones, so that users with existing handsets without Maopao pre-installed can download and install Maopao to
access applications and content on Maopao. User acceptance of over-the-air download of Maopao and our ability to pre-install Maopao in smart phones will also affect our user base and results of operations.

Our ability to continue to source and offer popular applications and content and generate revenues from our large user base

We generate revenues primarily through users purchases of mobile applications and other content offered on Maopao. These purchases
substantially depend on our ability to source applications and content that appeal to rapidly changing user preferences, mobilize our user base into a community of active members and appropriately price our content offerings. Our ability to identify
and offer applications and other content appealing to our target users in China, such as popular local card games, mobile social games, mobile books, dating-related applications and other social network functions, has significantly contributed to
our revenue growth.

We believe the popularity of our applications and content on Maopao will affect the loyalty of our users
and their willingness to spend money on such applications and content. As user preferences for mobile applications and other content can change quickly, our results of operations significantly depend on our ability to source, aggregate and update
applications and content on Maopao to cater to users interests and attract users to download and pay for such applications and content. In particular, we believe our users have a growing interest in mobile community-based applications and
content, and we have been focusing on developing our Maopao Community, which features applications and content with social network functions.

We plan to enhance our mobile community content with a focus on mobile social games. Revenues from mobile social games have grown rapidly since February 2010, when we launched Fantasy of the Three
Kingdoms, our first major mobile social game, and we intend to increase our offerings of mobile social games to capture user interest. We expect to introduce several new mobile social games over the next year. We also plan to improve access to the
Maopao Community by prioritizing the placement of our community offerings within the Maopao store. Furthermore, we are expanding the use of our unified account management system so that each of our users has a unique account on Maopao, which will
facilitate users access and use of Maopao Community functions.

We expect to incur additional operational costs, as the
expansion of the Maopao Community will require more resources in terms of personnel, server capacity and customer support. However, we do not expect such additional costs to materially impact our total operating expenses. We believe that the
expansion of community-based content and applications and the development of the Maopao Community will positively impact our liquidity, capital resources and results of operations. However, we have limited experience in this area and a number of
factors could materially adversely affect our expansion plans. See Item 3. Key Information  D. Risk Factors  Risks Related to Our Business and Our Industry  As community-based applications and other content
offered through Maopao are expected to account for an increasing portion of our future revenues, any adverse developments relating to such content may adversely affect our results of operations.

We typically determine the prices of applications and content on the Maopao application store. In addition to paid applications and
content, we offer certain applications and content free of charge to generate user interest. We believe our results of operations will be significantly depend on our ability to balance free offerings with paid offerings and set appropriate price
points to optimize monetization of our user base.

Our ability to more efficiently collect sales proceeds from mobile service providers
and increase the use of third-party payment channels

We collect a substantial majority of our revenues through
mobile service providers who utilize mobile network operators billing channels to collect sales proceeds from users purchases on the Maopao application store. Billing and transmission failures, such as failures to transmit MR data
due to technical problems with the network or service providers failure to collect all or part of sales proceeds due from network operators, adversely affect collection efficiency. The ability of mobile service providers to avoid and address
such failures varies. When users make a purchase from the Maopao application store, we have the flexibility to direct the purchase to the mobile service provider of our choice.



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We aim to maximize collection of sales proceeds by using mobile service providers that we
believe have better collection performance, shorter payment periods and lower transmission error rates, and closely monitoring our relationships with mobile service providers to lower collection risk. We share sales proceeds with mobile service
providers, who in turn have revenue-sharing arrangements with mobile network operators. Payment channel cost constituted the largest component of our cost of revenues in each of the three fiscal years ended March 31, 2012.

In addition, to diversify users payment options, we have introduced our own form of virtual payment, K Currency, which users
can purchase using a variety of means. Although we have not historically collected a significant portion of sales proceeds through K Currency, we aim to significantly increase the use of K Currency among our users. We have entered into
payment cooperation agreements with six payment processing agents and are actively promoting the use of third-party payment channels among our users, such as by offering promotional K Currency to users making payment through third-party payment
channels.

Because as a percentage of sales amounts, costs charged by payment processing agents are generally lower than
costs charged by mobile service providers, we believe the increasing utilization of third-party payment channels will also help reduce our cost of revenues and potentially improve our profitability. Furthermore, as currently users can only purchase
virtual items in our social network applications and mobile social games in the Maopao Community with the K Currency, the percentage of sales proceeds collected from third-party payment channels is also largely affected by the growth of such
community-based applications and content titles. We plan to extend the availability of these third-party payment channels to all our users for all applications and content, in the form of a branded billing gateway, which we named the Easy Mobile Pay
System.

Our ability to control costs related to handset companies and content providers

We share sales proceeds with handset companies that pre-install the Maopao application store as well as content providers from whom we
license applications and content. Aggregate amounts paid to handset companies and content providers constituted a significant portion of our total cost of revenues in each of the three fiscal years ended March 31, 2012. Therefore, any change in
our sales proceeds sharing percentage with handset companies and content providers, due to competition or otherwise, could significantly affect our results of operations. For some third-party applications or content titles, we make a one-time
payment to the content provider for all of its rights. If such applications or content titles, or applications or content titles developed by our in-house team, become popular with users, we may achieve higher profit margins.

In line with industry practice in the PRC, we share sales proceeds with content providers and handset companies based on user
transaction data provided by mobile service providers, and calculate exact shared amounts based on corresponding content or handset model identification information included in such data. To share such sales proceeds, handset companies need to build
in a specific authorization code we designate to identify handset companies, as well as applications or content titles, when pre-installing the Maopao application store.

Historically, when introducing a new handset model in a short time, handset companies might have pre-installed our application store to enhance handset features without having obtained the authorized
codes from us. In such circumstances, these handsets could still access Maopao, but we would not be able to properly recognize the handset model from which a particular transaction is originated and, as a result, we would not be able to share sales
amounts with handset companies for transactions effected through these handsets. Our track record of sharing sales proceeds with handset companies and our reputation in the industry promoted our brand and our ability to generate additional revenue
streams for handset companies. As such, an increasing number of handset companies worked with us to pre-install our authorized codes in each of the past three years. Therefore, during the same period, the percentage of transactions effected through
Maopao for which we need to share sales proceeds with handset companies increased, and our cost of revenues associated with payments to handset companies, increased accordingly.



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Our ability to address challenges associated with policy changes and mobile network operators
business practices

PRC government authorities and mobile network operators may issue or revise rules, policies or
guidelines that may affect our results of operations. For example, in January 2010, China Mobile began to implement measures under which any party offering mobile applications and content that are embedded in handsets was required to introduce
additional notices and confirmations to users during the purchase of such offerings. Previously a single SMS code could be used for multiple service offerings or partners, while under these measures users may need to send two confirmation SMSs
before effecting a transaction, which makes it more burdensome for users to purchase applications and content through Maopao. As a result, some users purchase fewer applications and content through Maopao.

In addition, when more SMSs need to be transmitted to effect the same volume of transactions, we may face incremental billing and
transmission failures. As a result, any of these measures may lead to a higher percentage of downloads that fail to result in payments, which would affect our revenues and results of operations. Since September 2010, China Mobile has applied new
measures that require users to send triple confirmation SMSs before a transaction can be effected.

When more SMSs need to be
transmitted to effect the same volume of transactions, we face more billing and transmission failures. These developments adversely affected our revenues. Partly due to the triple-confirmation-SMS measures adopted by China Mobile, our revenue growth
has been declining since September 2010. Similar or more stringent measures imposed by the government or mobile network operators could materially adversely affect our results of operations.

In addition, since late 2009, key mobile network operators have increased their monitoring of inappropriate mobile content and
activities through quality control procedures on services provided by mobile service providers. They unilaterally terminated the services provided by some mobile service providers because these mobile service providers allegedly provided
inappropriate content in violation of regulatory requirements or charged users service fees without their consent. After directing users to make payments through other mobile service providers, we experienced delays associated with such changes,
resulting in a loss of revenue during the change over period. Furthermore, mobile service providers have different settlement efficiencies and proceeds sharing ratios. As a result of such changes, our revenues and costs may be adversely affected.

Our ability to achieve high operating efficiency

Our operating expenses include research and development expenses, sales and marketing expenses, general and administrative expenses and other operating income, net, mainly consisting of salary and
benefits expenses, including share-based compensation charges, professional fees, training expenses, overhead and communication expenses.

Our total operating expenses increased from RMB65.9 million in fiscal 2010 to RMB188.8 million (US$30.0 million) in fiscal 2012, and our operating expenses excluding share-based compensation
increased from RMB62.5 million in fiscal 2010 to RMB146.0 million (US$23.2 million) in fiscal 2012, as we hired more personnel to facilitate our expansion and incurred more expenses to support our growth.

Operating expenses excluding share-based compensation as a percentage of our total revenues increased from 11.5% to 21.3% from fiscal
2010 to fiscal 2012, primarily as a result of our increased headcount and sales and marketing activities, partially offset by cost savings resulting from improvements in labor efficiency. As we have become a public company, our operating expenses
increased in absolute amount, and we aim to maintain or enhance our operating efficiency as our business expands.

Description of Certain
Statement of Operations Items

Revenues

Our revenues amounted to RMB544.3 million, RMB675.3 million and RMB685.6 million (US$108.9 million) in the fiscal years ended March 31, 2010, 2011 and 2012, respectively, as we rapidly expanded
our user base, resulting in increased user purchases of mobile application and content offerings on Maopao.



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In the three fiscal years ended March 31, 2012, we derived a substantial majority of
our revenues from sales of mobile applications and other content through our Maopao application store, which we refer to as application store revenues. We collected a substantial majority of our sales proceeds through mobile service providers, who
utilize mobile network operators billing channels pursuant to agreements with network operators. Our users can purchase our single-user applications and content titles and some social network applications offered in our Maopao application
store through mobile service providers billing channels.

Prior to April 2010, our users could also pay for
applications and virtual items offered through Maopao Community through service providers, although revenues from such payments were immaterial in the three fiscal years ended March 31, 2010. Starting from April 2010, we no longer provided this
payment option. We recognize application store revenue on a gross basis and recognize the commissions retained by the mobile service providers and mobile network operators as cost of revenues in our consolidated statements of comprehensive income.

We offer our own virtual currency, K Currency, allowing members of our Maopao Community to purchase virtual items in
our community-based applications, including our mobile social games and social network applications. We refer to such revenues as Maopao Community revenues through K Currency. Users can purchase K Currency through a number of payment
options, including pre-paid phone cards, pre-paid game cards, bank debit cards, wire-transfers and Alipay, and we collect sales amounts through payment processing agents. We record Maopao Community revenues through K Currency net of fees
charged by payment processing agents.

We also record certain fees and commissions we receive as other revenues. For example,
certain mobile service providers and one mobile network operator sell mobile applications and other content to mobile phone users through Maopao, for which we charge a commission equal to a percentage of the revenues that the mobile service
providers and the mobile network operator receive from mobile phone users with respect to such applications and content. In addition, we place some of our mobile applications and content, such as some simple card games and mobile music and books we
license, on websites or mobile platforms of certain service providers, and charge a commission on the sale of such mobile applications and content. We recognize revenue upon receipt of monthly statements from the mobile service providers.

The following table sets forth application store revenues, Maopao Community revenues through K Currency and other
revenues, both in absolute amount and as a percentage of total revenues, for the periods indicated:



|                                                |  |                                   |         |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |         |  |  |  |       | 
|----------------------------------------------- |  | --------------------------------- | ------- |  | ---- |  | ----- | ---- |  |  | ------- |  |  | --- | ----- |  | --- |  | ------- | - |  |  | ------- |  |  |  | ----- | 
|                                                |  | For the Year Ended March 31,      |        
|                                                |  | 2010                              |         |  | 2011 |  |       | 2012 | 
|                                                |  | RMB                               |         |  | %    |  |       | RMB  |  |  | %       |  |  | RMB |       |  | US$ |  |         | % | 
|                                                |  | (in thousands, except percentage) |        
|                                                |  |                                   |         |  |      |  |      
|Revenues                                        |  |                                   |         |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |         |  |  |  |       | 
|Application store revenues(1)                   |  |                                   | 515,768 |  |      |  | 94.8  |      |  |  | 598,782 |  |  |     | 88.7  |  |     |  | 546,117 |   |  |  | 86,720  |  |  |  | 79.7  | 
|Maopao Community revenues through K Currency(2) |  |                                   | 3,578   |  |      |  | 0.6   |      |  |  | 60,050  |  |  |     | 8.9   |  |     |  | 110,536 |   |  |  | 17,553  |  |  |  | 16.1  | 
|Other revenues                                  |  |                                   | 24,912  |  |      |  | 4.6   |      |  |  | 16,462  |  |  |     | 2.4   |  |     |  | 28,910  |   |  |  | 4,590   |  |  |  | 4.2   | 
|                                                |  |                                   |         |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |         |  |  |  |       | 
|                                                |  |                                   |         |  |      |  |      
|Total Revenue                                   |  |                                   | 544,258 |  |      |  | 100.0 |      |  |  | 675,294 |  |  |     | 100.0 |  |     |  | 685,563 |   |  |  | 108,863 |  |  |  | 100.0 | 
|                                                |  |                                   |         |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |         |  |  |  |       | 



|(1) | Application store revenues represent revenues collected through carrier channels.
|--- | ---------------------------------------------------------------------------------

|(2) | Maopao Community revenues through K Currency represent revenues collected through third party channels.
|--- | -------------------------------------------------------------------------------------------------------



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Our revenue growth is primarily due to the growth in user downloads of our applications and
content titles, which in turn is driven by an expansion of the installed base of Maopao in mobile handsets, an increase in the diversity and quality of our content portfolio and improvements in our ability to identify and source content that appeals
to our users. In the fiscal year ended March 31, 2012, the number of new users added to our Maopao application store increased to approximately 321.7 million from approximately 220.5 million in the fiscal year ended March 31,
2010. However, the increase in user activity has slowed due to the declining feature phone market in China. The following table sets forth total user downloads of our single-user applications and content titles for the periods indicated:



|                                              |  |                              |       |  |      |  |         |      |  |  |         | 
|--------------------------------------------- |  | ---------------------------- | ----- |  | ---- |  | ------- | ---- |  |  | ------- | 
|                                              |  | For the Year Ended March 31, |      
|                                              |  | 2010                         |       |  | 2011 |  |         | 2012 | 
|                                              |  | RMB                          |       |  | RMB  |  |         | RMB  | 
|                                              |  | (in millions)                |      
|Single-user application and content downloads |  |                              |       |  |      |  |         |      |  |  |         | 
|Single-player games                           |  |                              | 851.0 |  |      |  | 1,351.8 |      |  |  | 1,279.7 | 
|Multimedia applications and content titles    |  |                              | 341.7 |  |      |  | 587.5   |      |  |  | 526.0   | 
|Other single-user applications                |  |                              | 397.5 |  |      |  | 1,272.7 |      |  |  | 1,417.0 | 

We expect Maopao Community revenues through K Currency to increase in the foreseeable future as we
further develop our Maopao Community and increase the use of K Currency among our users. The following table sets forth our selected quarterly Maopao Community operating data for the periods indicated:



|                         |  |                                  |         |  |                   |  |         |                  |  |  |               |  |  |  |       | 
|------------------------ |  | -------------------------------- | ------- |  | ----------------- |  | ------- | ---------------- |  |  | ------------- |  |  |  | ----- | 
|                         |  | For the Three Month Period Ended |        
|                         |  | June 30,2011                     |         |  | September 30,2011 |  |         | December 31,2011 |  |  | March 31,2012 | 
|                         |  | (in millions)                    |        
|Number of active members |  |                                  | 14.7    |  |                   |  | 16.7    |                  |  |  | 16.9          |  |  |  | 17.3  | 
|Number of member log-ins |  |                                  | 1,360.6 |  |                   |  | 1,440.4 |                  |  |  | 1,101.5       |  |  |  | 775.1 | 

Cost of Revenues and Gross Margin

Our cost of revenues consists primarily of costs associated with payments to industry participants and direct costs.



|                                                        |  |                                   |         |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |        |  |  |  |       | 
|------------------------------------------------------- |  | --------------------------------- | ------- |  | ---- |  | ----- | ---- |  |  | ------- |  |  | --- | ----- |  | --- |  | ------- | - |  |  | ------ |  |  |  | ----- | 
|                                                        |  | For the Year Ended March 31,      |        
|                                                        |  | 2010                              |         |  | 2011 |  |       | 2012 | 
|                                                        |  | RMB                               |         |  | %    |  |       | RMB  |  |  | %       |  |  | RMB |       |  | US$ |  |         | % | 
|                                                        |  | (in thousands, except percentage) |        
|                                                        |  |                                   |         |  |      |  |      
|Cost of Revenues                                        |  |                                   |         |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |        |  |  |  |       | 
|Costs associated with payments to industry participants |  |                                   | 341,542 |  |      |  | 96.4  |      |  |  | 425,514 |  |  |     | 91.5  |  |     |  | 429,385 |   |  |  | 68,183 |  |  |  | 91.2  | 
|Direct costs                                            |  |                                   | 12,809  |  |      |  | 3.6   |      |  |  | 39,323  |  |  |     | 8.5   |  |     |  | 41,640  |   |  |  | 6,613  |  |  |  | 8.8   | 
|                                                        |  |                                   |         |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |        |  |  |  |       | 
|Total cost of revenues                                  |  |                                   | 354,351 |  |      |  | 100.0 |      |  |  | 464,837 |  |  |     | 100.0 |  |     |  | 471,025 |   |  |  | 74,796 |  |  |  | 100.0 | 
|                                                        |  |                                   |         |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |        |  |  |  |       | 

Costs associated with payments to industry participants represent consideration paid to (i) mobile
service providers for collecting application store revenues; (ii) handset companies for pre-installing Maopao onto their handsets before shipment and (iii) content providers for licensing applications and content that we provide on the
Maopao application store.

As consideration for using their payment channels, we generally share with mobile service
providers a percentage of our sales proceeds collected through them. Our cooperation agreements with mobile service providers usually contain provisions relating to proceeds sharing ratios, processing fee ratios and billing rates of mobile network
operators. We usually settle our balances with mobile service providers every month. Revenues generated through our top three mobile service providers, the operating companies of Shenzhen Xunhong, Phoenix New Media, and Kongzhong, contributed
approximately 14%, 12% and 8%, respectively, of our total revenues for the fiscal year ended March 31, 2012. Our contracts with mobile service providers are usually for one or two year terms. Our contracts with the operating companies of
Shengzhen Xunhong, Phoenix New Media and Kongzhong will expire in November 2012, June 2013, and November 2012, respectively, and we expect to renew the contracts with these three companies on the same or similar terms.



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We generally pay handset companies a percentage of the sales proceeds we receive from
payment channels that are generated from their handsets. To share such sales proceeds, handset companies need to build in a specific authorization code we designate for each handset when pre-installing Maopao.

We typically pay content providers a percentage of the sales proceeds we receive from payment channels that are derived from their
content. For certain applications and content titles, we make a one-time payment to the content provider to acquire all associated rights, all of which we include in our cost of revenues at the time of such acquisition. We do not capitalize and
amortize such payments over the life of the application or content title because such applications and content titles usually have short life cycles and the acquisition cost for each application or content title is relatively low.

Direct costs include primarily fees we pay for outsourcing design-related work for pre-installing the Maopao application store on
handsets, salaries and benefits for Maopao application store operation employees, utilities, depreciation of equipment and office expenses directly related to the operation of Maopao. Following our purchase of additional servers and other computer
equipment used to operate the Maopao application store in the fiscal years ended March 31, 2011 and 2012, depreciation under our direct cost increased due to depreciation relating to such equipment. Direct costs increased primarily as a result
of the increase in headcount and promotion activities for the operation of some Maopao social games, such as our Chinese Poker Game.

Approximately RMB8.3 million and RMB27.3 million accrued costs payable for content and handset software design were reversed into cost of sales upon the expiration of the statute of limitations in the
fiscal years ended March 31, 2011 and 2012, respectively. Such accrued costs originated from the incomplete data provided by mobile network operators prior to March 2010. Due to the incompleteness of the data, we were unable to identify the
content sources or handset models for the relevant transactions. We did not have such a reversion in fiscal 2010.

Our gross
margins were 34.9%, 31.2% and 31.3% in the fiscal years ended March 31, 2010, 2011 and 2012, respectively. Our gross margin remained stable in fiscal years 2011 and 2012 primarily because the increase in our costs was in line with our revenue
growth.

Operating Expenses

Our operating expenses consist of research and development expenses, sales and marketing expenses, general and administration expenses and other operating income. The following table sets forth a
breakdown of our operating expenses in absolute amount and as a percentage of our total operating expenses for the periods indicated:



|                                    |  |                                   |        |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |        |   |  |  |       |  
|----------------------------------- |  | --------------------------------- | ------ |  | ---- |  | ----- | ---- |  |  | ------- |  |  | --- | ----- |  | --- |  | ------- | - |  |  | ------ | - |  |  | ----- | -
|                                    |  | For the Year Ended March 31,      |       
|                                    |  | 2010                              |        |  | 2011 |  |       | 2012 | 
|                                    |  | RMB                               |        |  | %    |  |       | RMB  |  |  | %       |  |  | RMB |       |  | US$ |  |         | % | 
|                                    |  | (in thousands, except percentage) |       
|                                    |  |                                   |        |  |      |  |      
|Operating Expenses                  |  |                                   |        |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |        |   |  |  |       |  
|Research and development expenses   |  |                                   | 26,900 |  |      |  | 40.8  |      |  |  | 52,260  |  |  |     | 27.6  |  |     |  | 71,088  |   |  |  | 11,289 |   |  |  | 37.7  |  
|Sales and marketing expenses        |  |                                   | 21,511 |  |      |  | 32.6  |      |  |  | 38,200  |  |  |     | 20.2  |  |     |  | 37,361  |   |  |  | 5,933  |   |  |  | 19.8  |  
|General and administration expenses |  |                                   | 17,507 |  |      |  | 26.6  |      |  |  | 98,938  |  |  |     | 52.2  |  |     |  | 83,996  |   |  |  | 13,338 |   |  |  | 44.5  |  
|Other operating income, net         |  |                                   |       |  |      |  |      |      |  |  |        |  |  |     |      |  |     |  | (3,675  | ) |  |  | (584   | ) |  |  | (2.0  | )
|                                    |  |                                   |        |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |        |   |  |  |       |  
|Total operating expenses            |  |                                   | 65,918 |  |      |  | 100.0 |      |  |  | 189,398 |  |  |     | 100.0 |  |     |  | 188,770 |   |  |  | 29,976 |   |  |  | 100.0 |  
|                                    |  |                                   |        |  |      |  |       |      |  |  |         |  |  |     |       |  |     |  |         |   |  |  |        |   |  |  |       |  

Research and development expenses

Our research and development expenses consist primarily of salaries and benefits for personnel engaged in the research and development of
Maopao, mobile applications and content and communication fees we paid for testing our research and development work. Our share-based compensation charges allocated under research and development expenses amounted to approximately
RMB0.5 million, RMB9.5 million and RMB8.5 million (US$1.4 million) in the fiscal years ended March 31, 2010, 2011 and 2012, respectively. Research and development expenses accounted for 4.9%, 7.7% and 10.4% of our total revenues
in the fiscal years ended March 31, 2010, 2011 and 2012, respectively.



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Our research and development expenses have been increasing in recent years primarily
because we hired additional engineers and researchers and increased the fees we paid for outsourcing research and development work. We expect that our research and development expenses will increase in the future as we devote resources to improve
Maopaos user experience both on feature phones and smart phones.

Sales and marketing expenses

Our sales and marketing expenses primarily consist of salaries and benefits for our sales and marketing staff, training expenses for our
sales team, traveling, entertainment and sales office related expenses and market survey fees. Our share-based compensation charges allocated under sales and marketing expenses amounted to approximately RMB0.6 million, RMB4.7 million and RMB3.6
million (US$0.6 million) in the fiscal years ended March 31, 2010, 2011 and 2012, respectively. Sales and marketing expenses accounted for 4.0%, 5.7% and 5.4% of our total revenues in the fiscal years ended March 31, 2010, 2011 and 2012,
respectively.

Our sales and marketing expenses decreased slightly in the fiscal year ended March 31, 2012, primarily
due to our efforts to enhance labor efficiency. We expect that our sales and marketing expenses will increase as we promote our Maopao brand name, devote efforts to expand the handset installation base of the Maopao application store in the feature
phone market and promote our Application Store II in the smart phone market.

General and administration expenses

Our general and administration expenses primarily consist of salaries and benefits for our general and administration,
finance and human resources personnel, training expenses, depreciation and amortization expenses, office rentals, professional service fees and other expenses incurred in connection with general corporate purposes. Our share-based compensation
charges allocated under general and administration expenses amounted to RMB2.3 million, RMB33.4 million and RMB30.7 million (US$4.9 million) in the fiscal years ended March 31, 2010, 2011 and 2012, respectively. General and
administration expenses accounted for approximately 3.2%, 14.7% and 12.3% of our total revenues in the fiscal years ended March 31, 2010, 2011 and 2012, respectively.

Our general and administration expenses in the fiscal year ended March 31, 2012 decreased compared to the fiscal year ended March 31, 2011, primarily due to lower management bonuses and our
efforts to enhance labor efficiency. We expect our general and administration expenses to increase in absolute amount as we expand our business and incur additional expenses as a publicly traded company, which include expenses related to maintaining
our internal control over financial reporting and complying with our reporting obligations.

Other operating income, net

Our other operating income in fiscal 2012 was RMB3.7 million (US$0.6 million), and primarily related to local government
grants of RMB2.1 million (US$0.3 million) for certain research and development projects and gains of 1.9 million (US$0.3 million) as a result of the sale of a portion of our equity interests in Heisha to Heishas management in fiscal 2012.

Other Gains and Losses

We had other gains of RMB3.5 million, RMB11.2 million and RMB11.6 million (US$1.9 million) in fiscal 2010, 2011 and 2012, respectively. The gains in fiscal 2010 were primarily related to income on loan
receivables and other investments of RMB1.1 million and interest income of RMB1.1 million. The other gains in fiscal 2011 were primarily related to an exchange gain of RMB7.9 million and interest income of RMB2.7 million. The other gains in fiscal
2012 were primarily related to interest income of RMB12.1 million (US$1.9 million) and a government grant of RMB2.3 million (US$0.4 million) for our successful public offering in December 2010, partially offset by an exchange loss of RMB3.3 million
(US$0.5 million).



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Impairment on Investment in an Associate

We recognized a RMB5.8 million impairment of our investment in Hangzhou Guanzhun Technologies Co., Ltd., or Guanzhun, during the fiscal
year ended March 31, 2011, due to the continuing poor business performance and negative discounted cash flow forecast of the investee.

Finance Costs

We incurred finance costs of RMB5.4 million and RMB4.3 million in the fiscal years ended March 31, 2010 and 2011, respectively. The
finance cost was related to distributions payable to our Series A convertible redeemable preferred shares. We did not incur finance costs in the fiscal year ended March 31, 2012.

Share of Results of Associates

We had four associates that are
non-listed companies primarily engaged in wireless technology development and related applications in the PRC as of March 31, 2012. The results, assets and liabilities of these associates are incorporated in our consolidated financial
statements using the equity method of accounting.

Share-based Compensation

In March 2010, we adopted our 2010 Share Incentive Plan, or the 2010 Plan. The maximum number of shares that may be issued under the
2010 Plan is 15,000,000 shares. As of March 31, 2012, the aggregate number of common shares underlying our outstanding options under the 2010 Plan was 8,521,650 shares. The option holders are not entitled to dividends nor do they have
voting rights.

On March 1, 2010, we granted an aggregate of 6,385,400 share options to executive officers and
other employees with exercise prices of US$0.26 per share and various vesting provisions over four years. On April 1, 2010, we granted 1,443,600 share options to our employees. On September 15, 2010, we granted an aggregate of
3,320,400 share options with exercise prices of US$0.26 per share to executive officers and other employees. On January 6, 2011, we granted an aggregate of 100,000 share options with exercise prices of US$1.00 per share to executive
officers and other employees. On January 9, 2011, we granted an aggregate of 100,000 share options with exercise prices of US$1.00 per share to executive officers and other employees.

On August 2, 2007, we entered into a Share Vesting Agreement with Xplane Ltd. and each of the then individual shareholders of
Xplane Ltd. Pursuant to this agreement, of the 150,000,000 common shares owned by Xplane Ltd., we have the right to repurchase 75,000,000 restricted shares, at their par value of US$0.00005 per share, from Xplane Ltd. in the event of the
voluntary or involuntary termination of the individual shareholders employment with us. These restricted shares shall be released from the restriction over a period of thirty-six months, with one thirty-sixth (1/36) of the restricted
shares being released from the restriction at the end of each calendar month. The holders of the restricted shares retain voting and dividend rights but are restricted from selling such non-vested restricted shares. This arrangement has been
accounted for as a reverse share split followed by the grant of a restricted share award under a performance-based plan due to the fact that each of the individual shareholders of Xplane Ltd. is also our employee. This has resulted in total
compensation cost of approximately RMB16.4 million amortized on a graded basis over the restricted shares vesting period of 36 months.

On April 1, 2010, Xplane Ltd. issued 493,400 of its restricted shares to its shareholders who are also our employees. Of these 493,400 shares, 40% vest on the second anniversary of the grant date and
20% vest on the third, fourth, and fifth anniversaries of the grant date. We measured the fair value of these restricted shares based on the fair value of our shares, as Xplane Ltd. has no other assets except for its investment in us. The fair value
of such restricted shares as of April 1, 2010 was RMB126 (US$19) per share. We recognize the total amount of approximately RMB62.4 million as compensation expense over the five-year deemed service, or vesting, period with a corresponding
increase in reserve in the statement of changes in equity.

On March 7, 2012, we issued 4,038,176 of our restricted
shares to our employees. At the same time, Xplane Ltd. granted 3,340,400 of our restricted shares to employees of our company. The holders of these shares retain the voting and dividends rights of, but are restricted from selling, such non-vested
restricted shares. The 7,378,576 shares vest 25% on each anniversary of the grant date. We measured the fair value of the restricted shares based on the open market quote of our shares, which was RMB2.88 (US$0.46). We recognize the total amount of
approximately RMB21.3 million as compensation expense over the four-year deemed service, or vesting, period with a corresponding increase in reserve in the statement of changes in equity.



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In the fiscal years ended March 31, 2010, 2011 and 2012, we had share-based
compensation charges of RMB3.6 million, RMB50.3 million and RMB45.7 million (US$7.3 million), respectively. The allocation of the share-based compensation charges recognized during these three fiscal years was as follows:



|                                            |  |                              |       |  |      |  |        |      |  |  |        |  |  |  |       | 
|------------------------------------------- |  | ---------------------------- | ----- |  | ---- |  | ------ | ---- |  |  | ------ |  |  |  | ----- | 
|                                            |  | For the Year Ended March 31, |      
|                                            |  | 2010                         |       |  | 2011 |  |        | 2012 | 
|                                            |  | RMB                          |       |  | RMB  |  |        | RMB  |  |  | US$    | 
|                                            |  | (in thousands)               |      
|Cost of revenues                            |  |                              | 143   |  |      |  | 2,656  |      |  |  | 2,939  |  |  |  | 467   | 
|Research and development expense            |  |                              | 539   |  |      |  | 9,528  |      |  |  | 8,536  |  |  |  | 1,356 | 
|Sales and marketing administration expenses |  |                              | 576   |  |      |  | 4,737  |      |  |  | 3,552  |  |  |  | 564   | 
|General and administration expenses         |  |                              | 2,348 |  |      |  | 33,369 |      |  |  | 30,656 |  |  |  | 4,868 | 
|                                            |  |                              |       |  |      |  |        |      |  |  |        |  |  |  |       | 
|                                            |  |                              |       | 
|Total                                       |  |                              | 3,606 |  |      |  | 50,290 |      |  |  | 45,683 |  |  |  | 7,255 | 
|                                            |  |                              |       |  |      |  |        |      |  |  |        |  |  |  |       | 

Taxation

Cayman Islands

We are incorporated in the Cayman Islands. Under Cayman Islands law, we are not subject to income or capital gains tax. In addition,
payment of dividends by us to our shareholders is not subject to withholding tax in the Cayman Islands.

China

PRC Enterprise Income Tax, or EIT

Prior to January 1, 2008, companies established in China were generally subject to a state tax and local EIT at statutory rates of 30% and 3% respectively. Our SPE, Hangzhou Sky, was established in
2005 and qualified as a software enterprise in 2007. Under PRC tax laws and regulations, an enterprise qualified as a software enterprise was entitled to an exemption from EIT for its first two profitable years and a 50%
reduction of its applicable EIT rate for the subsequent three years. Hangzhou Sky was thus entitled to a full exemption from the EIT in 2008 and 2009 and a 50% reduced EIT rate from 2010 to 2012.

On March 16, 2007, the National Peoples Congress of China enacted a new enterprise income tax law, or the PRC Enterprise
Income Tax Law, which took effect beginning January 1, 2008. On December 6, 2007, the State Council also adopted the Implementing Rules for the Enterprise Income Tax Law, or the Implementing Rules, which also took effect beginning
January 1, 2008. Under the PRC Enterprise Income Tax Law, foreign invested enterprises, or FIEs, and Chinese domestic companies are subject to EIT at a uniform rate of 25%. Our PRC subsidiaries and SPEs other than Hangzhou Sky and Mijia are
currently subject to the EIT rate of 25%.

Preferential tax treatments will continue to be granted to entities that are
classified as high and new technology enterprises strongly supported by the State or that conduct business in encouraged sectors, whether FIEs or domestic companies. On February 22, 2008, the Ministry of Finance and SAT promulgated
the Notice on Several Preferential Policies in Respect of Enterprise Income Tax, or Notice No. 1, reiterating the policy that a software enterprise newly established within China may, upon determination, be exempted from income taxes for its
first two profit-making years and shall be subject to the income tax at half the standard rate for the next three years.

On
April 24, 2009, the Ministry of Finance and SAT promulgated the Notice on Several Issues Relevant to the Implementation of the Preferential Policies on Enterprise Income Tax, which states that software enterprises and integrated circuit
production enterprises established prior to the end of 2007 may, upon certification, enjoy the preferential policies on the EIT reductions and exemptions within specified periods as provided in Notice No. 1. As a software
enterprise, Hangzhou Sky is entitled to an exemption from the EIT in 2008 and 2009 and a 50% reduced EIT rate from 2010 to 2012. The reduced applicable EIT rate for Hangzhou Sky from 2010 to 2012 is 12.5%. In addition, Hangzhou Sky qualified
as a high and new technology enterprise in 2008 and its qualification was reviewed and approved in 2011, which entitles it to a 15% preferential EIT rate from 2012 to 2014.



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After Hangzhou Skys qualification as a software enterprise expires at the
end of 2012, it will be entitled to the 15% preferential tax treatment as long as it continues to qualify as a high and new technology enterprise. In addition, Mijia, as a software enterprise, is entitled to a full exemption
from EIT in 2010 and 2011 and a 50% reduced EIT rate from 2012 to 2014. The reduced applicable EIT rate for Mijia from 2012 to 2014 is 12.5%.

However, continued qualification as a high and new technology enterprise is subject to a review every three years by the relevant government authorities in China, and continued qualification
as a software enterprise is subject to an annual assessment by the relevant government authorities in China. Consequently, Hangzhou Sky or Mijia may not meet the qualifications and the relevant government authorities may revoke Hangzhou
Skys high and new technology enterprise or Mijias software enterprise status in the future. Any increase in Hangzhou Sky or Mijias EIT rate may materially adversely affect our results of operations.

In addition, under the PRC Enterprise Income Tax Law and the Implementing Rules, dividends generated from the business of
our PRC subsidiaries after January 1, 2008 and payable to us may be subject to a withholding tax of 10% as we are a non-resident enterprise incorporated outside of the PRC and the Cayman Islands does not have a tax treaty with China that
provides for a different withholding arrangement. Distributions of earnings generated before January 1, 2008 are exempt from PRC withholding tax.

The PRC Enterprise Income Tax Law provides that enterprises established outside China whose effective management is located in China are considered resident enterprises and will
generally be subject to the uniform 25% EIT rate on their global income. Under the implementation regulations, effective management is defined as substantial and overall management and control over such aspects as the production and
business, personnel, accounts and properties of an enterprise. We may be deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law and we may be subject to PRC enterprise income tax at the rate of 25% on our worldwide income.
See Item 3. Key Information  D. Risk Factors  Risks Related to Doing Business in China  We may be classified as a resident enterprise for PRC enterprise income tax purposes, which could result in our
global income becoming subject to 25% PRC enterprise income tax.

PRC Business Tax

According to the Notice on Implementing the Pilot Program for Replacing Business Tax with Value-added Tax in the Transportation Industry
and Some Modern Service Industries in Shanghai, or the Shanghai Implementing Measures, promulgated by the Ministry of Finance and the State Administration of Taxation on November 16, 2011, which became effective on January 1, 2012,
entities and individuals that provide transportation services and some modern services within the territory of Shanghai shall pay value-added tax, or VAT, instead of the business tax. Taxable services refer to land transportation services, water
transportation services, air transport services, pipeline transportation services, research and development and technical services, information technology services, cultural and creative services, logistics support services, tangible personal
property lease services and consulting services.

Pursuant to relevant tax rules, a 3% business tax rate applies to Hangzhou
Sky, Mijia and Fanyi with respect to their business of value-added telecommunications services that fall under the definition of value-added telecommunications services under the Catalog for Classifications of Telecommunications Business.

Critical Accounting Policies and Estimates

We prepare our financial statements in conformity with IFRS, which requires us to make judgments, estimates and assumptions. We regularly evaluate these estimates and assumptions based on the most
recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual
results could differ from our expectations as a result of changes in our estimates.



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An accounting policy is considered critical if it requires an accounting estimate to be
made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to
occur periodically, could materially impact the consolidated financial statements.

We believe that the following accounting
policies involve a higher degree of judgment and complexity in their applications and require us to make significant accounting estimates. You should read the following descriptions of critical accounting policies, judgments and estimates in
conjunction with our consolidated financial statements and other disclosures included in this annual report.

Revenue Recognition

Application Store Revenues

We recognize revenue when it is probable that the economic benefits will flow to us, revenue can be measured reliably and collectability is reasonably assured.

We generate revenue principally from the sale of a wide range of mobile applications and content, such as single-player games, mobile
music and books, mobile social games, social network functions and other content, to mobile handset users. Customers can download and purchase the mobile applications and content from our application store, the Maopao platform. The mobile
application store is a platform that allows users of mobile phones to browse and download applications and content. We have cooperation agreements with handset companies to pre-install the Maopao platform on mobile handsets before they reach users.

We deliver applications and content to customers primarily through mobile network operators in China. We contract with
mobile service providers, who further contract with and utilize mobile network operators billing channels, to collect payment from our customers on our behalf. Mobile service providers and mobile network operators, through the mobile service
providers, are entitled to commissions, which are a percentage of the gross fees collected from our customers by the mobile network operators.

For application store revenues from the sale of applications and content, we recognize revenue on a gross basis at the time when each application or content is successfully downloaded and collectability
is reasonably assured. We recognize the commissions retained by mobile service providers and mobile network operators as a cost of revenues in our consolidated statements of comprehensive income.

Users purchase in-game virtual premium items in certain single-player games. As the virtual items are immediately consumed, we recognize
revenue upon consumption.

Maopao Community Revenues through K Currency

We offer our own virtual currency, or K Currency, for members of Maopao Community to purchase in-game virtual items in our
community-based applications, including mobile social games and social network applications. Such revenues are called Maopao Community revenues through K Currency.

As an alternative to utilizing mobile service providers, we also contract with independent payment processing agents to process prepaid cards or online payment solutions into customer accounts. Customer
accounts are charged up with cash credit, which may be converted into K Currency. We collect a majority of Maopao Community revenues through K Currency. The payment processing agents are entitled to a commission for processing customer
prepayments.

Maopao Community revenues through K Currency are derived from the purchase of in-game virtual items having an
unlimited life. Such revenues are initially deferred and are subsequently recognized following the historical user retention pattern over the estimated consumption period of the durable virtual items, ranging from one to 12 months. We estimate the
user retention pattern and consumption period based on historical data and log-in patterns of paying users, including the average period paying users typically stay active in the Maopao Community. We assess these estimates at the end of each
reporting period.



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Other Revenues

We allow mobile service providers and one mobile network operator to sell their mobile applications to mobile users through our Maopao
platform. We charge the mobile service providers and the mobile network operator a commission based on a percentage of the revenue earned by the mobile service providers and mobile network operator. We recognize revenue upon receipt of monthly
statements from the mobile service providers and the mobile network operator.

We also generate minimal application store
revenues from overseas countries through local mobile service providers. We recognize such revenues upon receipt of acknowledgement of successful downloads from these local mobile service providers.

We record revenues net of sales discounts paid to end users.

Share-Based Compensation

We recognize share-based compensation in
our statement of comprehensive income based on the fair value of equity awards on the date of the grant, with compensation expense recognized over the period in which the recipient is required to provide service to us in exchange for the equity
award.

Since our ADSs were listed on the NASDAQ Global Market in December 2010, we have determined the estimated fair value
of our ordinary shares underlying the options based on the closing trading price of our ADSs as of the option grant date.

We
use the Black-Scholes option pricing model to determine the estimated fair value of share options and restricted shares. Determining the value of our share based compensation expense in future periods will require the input of highly subjective
assumptions, including our expected stock price volatility over the term of the awards, actual and projected employee share option exercise behaviors, the risk-free interest rate and expected dividends. Our share-based compensation charges may
change based on changes to these estimates.

We also periodically review the estimate of forfeiture rates, which may also
affect the expenses recognized in profit or loss.

Taxation

We estimate income tax expense for each jurisdiction in which we operate and for each period presented, which includes estimating current
tax exposure as well as assessing realizable deferred tax assets and deferred tax liabilities.

As of March 31, 2010,
2011 and 2012, our deferred tax assets were RMB4.4 million, RMB6.7 million and RMB2.2 million (US$0.4 million), respectively, primarily resulting from temporary differences between accounting and tax bases. We recognize deferred income
taxes for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and credits, by applying enacted statutory tax rates applicable to
future years. If we determined that we could realize our deferred tax assets in excess of their recorded amount, an adjustment to the carrying amount of our deferred tax assets would increase our net income in the period in which we made such
determination. Likewise, if we determined that we would not be able to realize all or part of our net deferred tax assets, an adjustment to the carrying amount of our deferred tax assets would be charged to our consolidated statements of
comprehensive income in the period in which we made such determination.

We consider positive and negative evidence to
determine whether some portion or all of the deferred tax assets will more likely than not be realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the
duration of statutory carryforward periods, our experience with tax attributes expiring unused and tax planning alternatives. Our ability to realize deferred tax assets depends on our ability to generate sufficient taxable income within the
carryforward periods provided for in the tax law. As of March 31, 2012, no deferred tax assets had been recognized in respect of tax losses of RMB38.0 million (US$6.0 million).



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Consolidated Results of Operations

The following table sets forth a summary of our consolidated results of operations by amount and as a percentage of our total revenues
for the periods indicated. This information should be read together with our audited consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of
the results that may be expected for any future period.



|                                                                                |  |                                                            |          |   |      |  |       |      |  |  |          |   |  |     |       |   |     |  |          |   |  |  |         |   |  |  |       |  
|------------------------------------------------------------------------------- |  | ---------------------------------------------------------- | -------- | - | ---- |  | ----- | ---- |  |  | -------- | - |  | --- | ----- | - | --- |  | -------- | - |  |  | ------- | - |  |  | ----- | -
|                                                                                |  | For the Year Ended March 31,                               |         
|                                                                                |  | 2010                                                       |          |   | 2011 |  |       | 2012 | 
|                                                                                |  | RMB                                                        |          |   | %    |  |       | RMB  |  |  | %        |   |  | RMB |       |   | US$ |  |          | % | 
|                                                                                |  | (in thousands, except number of shares and per share data) |         
|Consolidated Statements of Comprehensive Income Data                            |  |                                                            |          |   |      |  |       |      |  |  |          |   |  |     |       |   |     |  |          |   |  |  |         |   |  |  |       |  
|Revenues                                                                        |  |                                                            | 544,258  |   |      |  | 100.0 |      |  |  | 675,294  |   |  |     | 100.0 |   |     |  | 685,563  |   |  |  | 108,863 |   |  |  | 100.0 |  
|Cost of revenues from third parties                                             |  |                                                            | (353,106 | ) |      |  | (64.9 | )    |  |  | (461,422 | ) |  |     | (68.3 | ) |     |  | (465,479 | ) |  |  | (73,915 | ) |  |  | (67.9 | )
|Cost of revenues from related parties                                           |  |                                                            | (1,245   | ) |      |  | (0.2  | )    |  |  | (3,415   | ) |  |     | (0.5  | ) |     |  | (5,546   | ) |  |  | (881    | ) |  |  | (0.8  | )
|                                                                                |  |                                                            |          |   |      |  |       |      |  |  |          |   |  |     |       |   |     |  |          |   |  |  |         |   |  |  |       |  
|                                                                                |  |                                                            |          |   |      |  |      
|Gross profit                                                                    |  |                                                            | 189,907  |   |      |  | 34.9  |      |  |  | 210,457  |   |  |     | 31.2  |   |     |  | 214,538  |   |  |  | 34,067  |   |  |  | 31.3  |  
|                                                                                |  |                                                            |          |   |      |  |       |      |  |  |          |   |  |     |       |   |     |  |          |   |  |  |         |   |  |  |       |  
|                                                                                |  |                                                            |          |   |      |  |      
|Research and development expenses                                               |  |                                                            | (26,900  | ) |      |  | (4.9  | )    |  |  | (52,260  | ) |  |     | (7.7  | ) |     |  | (71,088  | ) |  |  | (11,289 | ) |  |  | (10.4 | )
|Sales and marketing expenses                                                    |  |                                                            | (21,511  | ) |      |  | (4.0  | )    |  |  | (38,200  | ) |  |     | (5.7  | ) |     |  | (37,361  | ) |  |  | (5,933  | ) |  |  | (5.4  | )
|General and administration expenses                                             |  |                                                            | (17,507  | ) |      |  | (3.2  | )    |  |  | (98,938  | ) |  |     | (14.7 | ) |     |  | (83,996  | ) |  |  | (13,338 | ) |  |  | (12.3 | )
|Other operating income, net                                                     |  |                                                            |         |   |      |  |      |      |  |  |         |   |  |     |      |   |     |  | 3,675    |   |  |  | 584     |   |  |  | 0.5   |  
|                                                                                |  |                                                            |          |   |      |  |       |      |  |  |          |   |  |     |       |   |     |  |          |   |  |  |         |   |  |  |       |  
|                                                                                |  |                                                            |          |   |      |  |      
|Profit from operations                                                          |  |                                                            | 123,989  |   |      |  | 22.8  |      |  |  | 21,059   |   |  |     | 3.1   |   |     |  | 25,768   |   |  |  | 4,091   |   |  |  | 3.8   |  
|Other gains and losses                                                          |  |                                                            | 3,531    |   |      |  | 0.6   |      |  |  | 11,179   |   |  |     | 1.7   |   |     |  | 11,649   |   |  |  | 1,850   |   |  |  | 1.7   |  
|Impairment of investment in an associate                                        |  |                                                            |         |   |      |  |      |      |  |  | (5,760   | ) |  |     | (0.9  | ) |     |  |         |   |  |  |        |   |  |  |      |  
|Finance costs                                                                   |  |                                                            | (5,417   | ) |      |  | (1.0  | )    |  |  | (4,333   | ) |  |     | (0.6  | ) |     |  |         |   |  |  |        |   |  |  |      |  
|Share of results of associates                                                  |  |                                                            | (1,255   | ) |      |  | (0.2  | )    |  |  | (6,012   | ) |  |     | (0.9  | ) |     |  | (886     | ) |  |  | (141    | ) |  |  | (0.1  | )
|Gain (loss) on changes in fair value of convertible redeemable preferred shares |  |                                                            | (290,135 | ) |      |  | (53.3 | )    |  |  | 106,684  |   |  |     | 15.8  |   |     |  |         |   |  |  |        |   |  |  |      |  
|Gain (loss) on changes in fair value of warrants                                |  |                                                            | (7,548   | ) |      |  | (1.4  | )    |  |  | 7,377    |   |  |     | 1.1   |   |     |  |         |   |  |  |        |   |  |  |      |  
|Loss on modification of convertible redeemable preferred shares                 |  |                                                            | (44,439  | ) |      |  | (8.2  | )    |  |  |         |   |  |     |      |   |     |  |         |   |  |  |        |   |  |  |      |  
|Profit (loss) before tax                                                        |  |                                                            | (221,274 | ) |      |  | (40.7 | )    |  |  | 130,194  |   |  |     | 19.3  |   |     |  | 36,531   |   |  |  | 5,800   |   |  |  | 5.3   |  
|                                                                                |  |                                                            |          |   |      |  |       |      |  |  |          |   |  |     |       |   |     |  |          |   |  |  |         |   |  |  |       |  
|                                                                                |  |                                                            |          |   |      |  |      
|Income tax benefit (expense)                                                    |  |                                                            | (8,528   | ) |      |  | (1.6  | )    |  |  | 5,367    |   |  |     | 0.8   |   |     |  | (3,602   | ) |  |  | (572    | ) |  |  | (0.5  | )
|                                                                                |  |                                                            |          |   |      |  |       |      |  |  |          |   |  |     |       |   |     |  |          |   |  |  |         |   |  |  |       |  
|Profit (loss) for the year                                                      |  |                                                            | (229,802 | ) |      |  | (42.2 | )    |  |  | 135,561  |   |  |     | 20.1  |   |     |  | 32,929   |   |  |  | 5,228   |   |  |  | 4.8   |  
|Total comprehensive income (loss) for the year                                  |  |                                                            | (229,802 | ) |      |  | (42.2 | )    |  |  | 135,561  |   |  |     | 20.1  |   |     |  | 32,929   |   |  |  | 5,228   |   |  |  | 4.8   |  
|                                                                                |  |                                                            |          |   |      |  |       |      |  |  |          |   |  |     |       |   |     |  |          |   |  |  |         |   |  |  |       |  



|* | Less than 0.1%.
|- | ---------------



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Fiscal Year Ended March 31, 2012 Compared to Fiscal Year Ended March 31, 2011

Revenues.Revenues increased by 1.5%, or RMB10.3 million, to RMB685.6 million (US$108.9 million) in
fiscal 2012 from RMB675.3 million in fiscal 2011, primarily due to an increase in our Maopao Community revenues through K Currency.

Application store revenues decreased by 8.8%, or RMB52.7 million, from RMB598.8 million in fiscal 2011 to RMB546.1 million (US$86.7 million) in fiscal 2012, primarily due to a decrease in application
store user activities and a deceleration of growth in downloads as a result of the shrinking feature phone market in China. Our cumulative number of users from January 1, 2007 increased from 655 million as of March 31, 2011 to
977 million as of March 31, 2012. Average revenue per download decreased due to the introduction of new measures by China Mobile and other mobile network operators that adversely affected the number of downloads from which we can recognize
revenues. See  Factors Affecting Our Results of Operations  Our ability to address challenges associated with policy changes and mobile network operators business practices. The price we typically charged for
our application and content offerings did not change between these two periods. However, we introduced more packages of applications and content that users can download for a flat fee.



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Our Maopao Community revenues through K Currency increased by 84.1%, or
RMB50.5 million, from RMB60.1 million in fiscal 2011 to RMB110.5 million (US$17.6 million) in fiscal 2012, primarily due to rapid growth in the number of active members and the increased spending per active member resulting from our two most
popular mobile social games, Fantasy of Three Kindoms and Fairy Magic World. We expect that our Maopao Community revenues through K Currency will contribute an increasing percentage of total revenues in future quarters
as we focus on growing our active mobile community member base and diversifying revenue collection methods away from the traditional carrier-based payment channels. The Maopao Community offers mobile social games and other social network
applications enabling user interaction.

Other revenues increased by 75.6%, or RMB12.4 million, from RMB16.5 million in
fiscal 2011 to RMB28.9 million (US$4.6 million) in fiscal 2012, primarily because of an increase in our promotion revenues as a result of our cooperation with China Mobiles reading platform.

Cost of Revenues.Cost of revenues increased by 1.3%, or RMB6.2 million, to RMB471.0 million (US$74.8 million) in fiscal 2012
from RMB464.8 million in fiscal 2011, primarily due to our increased spending on better quality mobile content to improve customer retention in the Maopao Community.

Gross Profit.As a result of the foregoing, gross profit increased by 1.9%, or RMB4.1 million, to RMB214.5 million (US$34.1 million) in fiscal 2012 from RMB210.5 million in fiscal 2011.
Our gross margin was substantially unchanged at 31.3% in fiscal 2012, compared to 31.2% in fiscal 2011, as our costs grew in line with our revenue.

Operating Expenses.Operating expenses decreased by 0.3%, or RMB0.6 million, to RMB188.8 million (US$30.0 million) in fiscal 2012 from RMB189.4 million in fiscal 2011. The decrease in our
operating expenses was primarily due to a decrease in our sales and marketing expenses and general and administration expenses, which was partially offset by an increase in our research and development expenses.



| |  |  | Sales and marketing expenses decreased by 2.2%, or RMB0.8 million, to RMB37.4 million (US$5.9 million) in fiscal 2012 from RMB38.2 million in
fiscal 2011, primarily due to a decrease in personnel expenses resulting from decreased headcount. Our sales and marketing employees decreased to 80 as of March 31, 2012 from 100 as of March 31, 2011. In fiscal 2012, we allocated RMB3.6
million (US$0.6 million) in share-based compensation under sales and marketing expenses, decreased by RMB1.1 million from RMB4.7 million in fiscal 2011.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | General and administration expenses decreased by 15.1%, or RMB14.9 million, to RMB84.0 million (US$13.3 million) in fiscal 2012 from
RMB98.9 million in fiscal 2011, primarily due to a decrease in management bonuses and our efforts to enhance labor efficiency. In fiscal 2012, we allocated RMB30.7 million (US$4.9 million) in share-based compensation under general and
administration expenses, which decreased by RMB2.7 million from RMB33.4 million in fiscal 2011.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Research and development expenses increased by 36.0%, or RMB18.8 million, to RMB71.1 million (US$11.3 million) in fiscal 2012 from
RMB52.3 million in fiscal 2011, primarily due to an increase in salaries and bonuses resulting from increased headcount. Our research and development staff increased to 239 as of March 31, 2012 from 204 as of March 31, 2011. In fiscal
2012, we allocated RMB8.5 million (US$1.4 million) in share-based compensation under research and development expenses, which decreased by RMB1.0 million from RMB9.5 million in fiscal 2011.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Profit from Operations.As a result of the foregoing, profit from operations increased by 22.4%, or RMB4.7 million, to
RMB25.8 million (US$4.1 million) in fiscal 2012 from RMB21.1 million in fiscal 2011.

Other Gains and Losses.We had
other gains of RMB11.6 million (US$1.9 million) in fiscal 2012, compared to other gains of RMB11.2 million in fiscal 2011. The other gains in fiscal 2012 were primarily related to interest income of RMB12.1 million (US$1.9 million) and a
government grant of RMB2.3 million (US$0.4 million) for our successful public offering in December 2010, partially offset by an exchange loss of RMB3.3 million (US$0.5 million). The other gains in fiscal 2011 were primarily related to an exchange
gain of RMB7.9 million (US$1.2 million) and interest income of RMB2.7 million (US$0.4 million).



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Impairment of investment in an associate.Impairment of investment in an associate
in fiscal 2011 primarily related to our investment in Guanzhun, due to its continuing poor business performance and negative discounted cash flow forecast. We did not incur such impairment for the fiscal year ended March 31, 2012.

Finance Costs.Finance costs were RMB4.3 million in fiscal 2011 due to distributions payable to our preferred shareholders.
We did not incur finance costs for the fiscal year ended March 31, 2012.

Share of Results of Associates.Our
share of results of associates amounted to RMB0.9 million (US$0.1 million) in fiscal 2012 and RMB6.0 million in fiscal 2011 and related to four and three of our associates, respectively, that are non-listed companies primarily engaged in
wireless technology development and related applications in the PRC.

Gain on Changes in Fair Value of Convertible
Redeemable Preferred Shares.The gain on changes in fair value of convertible redeemable preferred shares was RMB106.7 million in fiscal 2011. We have designated the Series A preferred shares as financial liabilities carried at fair
value through profit or loss. All of our Series A preferred shares were automatically converted into common shares immediately upon the completion of our initial public offering in December 2010.

Gain on Changes in Fair Value of Warrants.The gain on changes in fair value of warrants was RMB7.4 million in fiscal 2011.
We have designated the warrants as financial liabilities carried at fair value through profit or loss. All the warrants were exercised upon the completion of our initial public offering in December 2010.

Profit(Loss) before Tax.As a result of the foregoing, we had profit before tax of RMB36.5 million (US$5.8 million) in fiscal
2012. We had profit before tax of RMB130.2 million in fiscal 2011.

Income Tax Benefit (Expense).We had an
income tax expense of RMB3.6 million (US$0.6 million) in fiscal 2012, compared to an income tax benefit of RMB5.4 million in fiscal 2011. The income tax benefit in fiscal 2011 was primarily due to a RMB8.3 million deferred tax liability
associated with the dividend payment provided in fiscal 2010 which was released to profit and loss as we paid the aforementioned dividend in a tax-free manner in fiscal 2011. There was no such reversal in fiscal 2012.

Profit (Loss) for the Year.As a result of the foregoing, profit for the fiscal year 2012 was RMB32.9 million (US$5.2 million),
compared to a profit of RMB135.6 million in fiscal 2011.

Total Comprehensive Income (Loss) for the Year.As a
result of the foregoing, our total comprehensive income for the fiscal year 2012 was RMB32.9 million (US$5.2 million) in fiscal 2012, compared to total comprehensive income of RMB135.6 million in fiscal 2011.

Fiscal Year Ended March 31, 2011 Compared to Fiscal Year Ended March 31, 2010

Revenues.Revenues increased by 24.1%, or RMB131.0 million, to RMB675.3 million in fiscal 2011 from RMB544.3 million in
fiscal 2010, primarily due to fast growth in application user activity, the number of active members and spending per active member of Maopao Community.

Application store revenues increased by 16.1%, or RMB83.0 million, from RMB515.8 million in fiscal 2010 to RMB598.8 million in fiscal 2011, primarily due to the growth in user downloads of our
applications and content titles, which in turn is driven by an expansion of the installed base of Maopao in mobile handsets, an increase in the diversity and quality of our content portfolio and improvements in our ability to identify and source
content that appeals to our users. Our cumulative number of users from January 1, 2007 increased from 306.6 million as of March 31, 2010 to 655 million as of March 31, 2011. Average revenue per download decreased from fiscal
year 2010 due to the introduction of new measures by China Mobile and other mobile network operators that adversely affected the number of downloads for which we can recognize revenues. See  Factors Affecting Our Results of
Operations  Our ability to address challenges associated with policy changes and mobile network operators business practices. The price we charged for our application and content offerings did not change between these two
periods. However, we introduced more packages of applications and content that users can download for a flat fee.



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Our Maopao Community revenues through K Currency increased by 1,578.3%, or
RMB56.5 million, from RMB3.6 million in fiscal 2010 to RMB60.1 million in fiscal 2011, primarily due to the rapid growth in the number of registered members of the Maopao Community, from approximately 20.4 million as of March 31,
2010 to 72.7 million as of March 31, 2011, and the increase in the number of member log-ins, from 994.4 million in fiscal 2010 to 2,715.7 million in fiscal 2011. The Maopao Community offers mobile social games and other social
network applications enabling user interaction.

Other revenues decreased by 33.9%, or RMB8.5 million, from
RMB24.9 million in fiscal 2010 to RMB16.5 million in fiscal 2011, primarily because of the termination of our WAP billing business.

Cost of Revenues.Cost of revenues increased by 31.2%, or RMB110.5 million, to RMB464.8 million in fiscal 2011 from RMB354.4 million in fiscal 2010, primarily due to an increase in costs
under our revenue-sharing arrangements with industry participants, from RMB341.5 million in fiscal 2010 to RMB425.5 million in fiscal 2011, as a result of our increased revenues. To a lesser extent, the increase in cost of revenues was also due to
an increase in direct costs as a result of increased headcount and depreciation of servers and equipments in connection with our expanded operations of the Maopao Community.

Gross Profit.As a result of the foregoing, gross profit increased by 10.8%, or RMB20.6 million, to RMB210.5 million in fiscal 2011 from RMB189.9 million in fiscal 2010, and our gross
margin decreased to 31.2% in fiscal 2011, compared to 34.9% in fiscal 2010.

Operating Expenses.Operating expenses
increased by 187.3%, or RMB123.5 million, to RMB189.4 million in fiscal 2011 from RMB65.9 million in fiscal 2010. The increase in our operating expenses was primarily due to an increase in general and administration expenses and, to a
lesser extent, increases in our research and development expenses and sales and marketing expenses.



| |  |  | General and administration expenses increased by 465.1%, or RMB81.4 million, to RMB98.9 million in fiscal 2011 from RMB17.5 million in fiscal
2010, primarily due to RMB33.4 million in share-based compensation charges allocated under general and administration expenses in fiscal 2011 compared to RMB2.3 million in fiscal 2010. The increase was also due to increases in salaries and
bonuses from increased headcount, as well as professional fees regarding engagement of consultants to advise on our corporate culture.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Research and development expenses increased by 94.3%, or RMB25.4 million, to RMB52.3 million in fiscal 2011 from RMB26.9 million in fiscal
2010, primarily due to increases in salaries, bonuses and headcount. Our research and development staff increased to 204 as of March 31, 2011 from 163 as of March 31, 2010. The increase was also due to RMB9.5 million in share-based
compensation charges allocated under research and development expenses in fiscal 2011 compared to RMB0.5 million in fiscal 2010.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales and marketing expenses increased by 77.6%, or RMB16.7 million, to RMB38.2 million in fiscal 2011 from RMB21.5 million in fiscal 2010,
primarily due to an increase in salaries and bonus from increased headcount, as well as expenses in connection with increased marketing activities with handset companies and content providers. Our sales and marketing employees increased to 100 as of
March 31, 2011 from 50 as of March 31, 2010. In fiscal 2011, we recorded RMB4.7 million in share-based compensation charges allocated under sales and marketing expenses compared to RMB0.6 million in fiscal 2010.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Profit from Operations.As a result of the foregoing, profit from operations decreased by 83.0%, or
RMB102.9 million, to RMB21.1 million in fiscal 2011 from RMB124.0 million in fiscal 2010.

Other Gains and
Losses.We had other gains of RMB11.2 million in fiscal 2011, compared to other gains of RMB3.5 million in fiscal 2010. The other gains in fiscal 2011 were primarily related to an exchange gain of RMB7.9 million and interest income of
RMB2.7 million. The gains in fiscal 2010 were primarily related to income on loan receivable and other investment of RMB1.1 million, interest income of RMB1.1 million and a local government grant to us as a high-tech service company of
RMB0.6 million.



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Impairment of investment in an associate.We had an impairment of investment in an
associate of RMB5.8 million in fiscal 2011, which was primarily related to our investment in Guanzhun, due to its continuing poor business performance and negative discounted cash flow forecast. We did not incur such impairment in the fiscal year
ended March 31, 2010.

Finance Costs.Finance costs were RMB4.3 million in fiscal 2011 due to a distribution
payable to preferred shareholders. Our finance costs were RMB5.4 million in fiscal 2010 due to a distribution payable to preferred shareholders.

Share of Results of Associates.Our share of results of associates amounted to RMB6.0 million in fiscal 2011 and RMB1.3 million in fiscal 2010 and related to three of our associates that
are non-listed companies primarily engaged in wireless technology development and related applications in the PRC.

Gain(Loss) on Changes in Fair Value of Convertible Redeemable Preferred Shares.The gain on changes in the fair value of
convertible redeemable preferred shares was RMB106.7 million in fiscal 2011, compared to a loss of RMB290.1 million in fiscal 2010. We have designated the Series A preferred shares as financial liabilities carried at fair value through
profit or loss.

Gain(Loss) on Changes in Fair Value of Warrants.The gain on changes in fair value of warrants was
RMB7.4 million in fiscal 2011, compared to a loss of RMB7.5 million in fiscal 2010. We have designated the warrants as financial liabilities carried at fair value through profit or loss.

Loss on Modification of Convertible Redeemable Preferred Shares.The loss on modification of convertible redeemable preferred
shares was RMB44.4 million in fiscal 2010. In March 2010, we and the Series A shareholders agreed on certain modifications to the Series A preferred shares and agreed to issue to them an additional 5,000,000 common shares. We recorded
the intrinsic value of the 5,000,000 shares of RMB44.4 million, equal to the fair value of the common shares on March 1, 2010 less the exercise price of US$250, as a loss on modification of convertible redeemable preferred shares in
our consolidated statements of comprehensive income with a corresponding increase in equity. We did not incur such a loss in fiscal 2011.

Profit(Loss) before Tax.As a result of the foregoing, we had a profit before tax of RMB130.2 million in fiscal 2011. We had a loss of RMB221.3 million in fiscal 2010.

Income Tax Benefit (Expense).We had an income tax benefit of RMB5.4 million in fiscal 2011, compared to an income tax expense of
RMB8.5 million in fiscal 2010. This is primarily due to RMB8.3 million of deferred tax liability associated with the expected dividend payment being provided in fiscal 2010 which was released to profit and loss as we paid the aforementioned
dividend in a tax-free manner in fiscal 2011.

Profit (Loss) for the Year.As a result of the foregoing, profit for
the fiscal year 2011 was RMB135.6 million, compared to a loss of RMB229.8 million in fiscal 2010.

Total
Comprehensive Income(Loss) for the Year.As a result of the foregoing, our total comprehensive income for the fiscal year 2011 was RMB135.6 million, compared to a loss of RMB229.8 million in fiscal 2010.



|B. | Liquidity and Capital Resources
|-- | -------------------------------

We have financed our operations primarily through cash generated from operations, the issuance of Series A preferred shares and our initial public offering. All of our Series A preferred shares
automatically converted into common shares immediately upon the completion of our initial public offering in December 2010. Our cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal
or use, and which have maturities of three months or less when purchased. As of March 31, 2010, 2011 and 2012, we had RMB75.1 million, RMB367.2 million and RMB137.5 million (US$21.8 million) in cash and cash equivalents, respectively.



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As a holding company, we rely on dividends and other distributions from our subsidiaries in
China for our cash requirements. PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our
subsidiaries and SPEs in China is required to set aside at least 10% of its after tax profits, as determined on a calendar year basis and in accordance with PRC GAAP, if any, to fund a statutory reserve until such reserve reaches 50% of its
registered capital. The statutory reserve, equal to RMB1,000,000 as of March 31, 2012, is the same under both PRC GAAP and IFRS and is reflected as statutory reserve in the consolidated statements of changes in equity within our consolidated
financial statements. These reserves are not distributable as cash dividends. The difference between net profit, as determined under PRC GAAP, and the amount allocated to statutory reserve, for each of our subsidiaries and SPEs in China, represents
amounts that are free of restriction.

Such amounts differ from subsidiary or SPE equity less statutory reserve as determined
under IFRS due to accounting differences between PRC GAAP and IFRS. The aggregate retained earnings of our PRC subsidiaries and SPEs after setting aside required statutory reserve funding, determined in accordance with PRC GAAP, amounted to RMB292.1
million (US$46.4 million) as of March 31, 2012. However, the amount of retained earnings distributable to our offshore entities may be less than such amounts, as any dividend distribution may be subject to relevant taxes in the PRC when our
SPEs make payments to our PRC subsidiaries under contractual arrangements and when our PRC subsidiaries distribute dividends to the offshore entities. As discussed in Item 8. Financial Information  A. Consolidated Statements and Other
Financial Information  Dividend Policy, we do not plan to declare and pay any dividends on our shares or ADSs in the near future and currently intend to retain most, if not all, of our available funds and any future earnings to operate
and expand our business. Furthermore, if our subsidiaries in China incur debt in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.

Prior to July 1, 2010, we received economic benefits generated from our SPEs through various contractual arrangements entered into
by Pusida, our PRC subsidiary, with the SPEs. On July 1, 2010, through Dianneng, our other PRC subsidiary, we entered into contractual arrangements with Hangzhou Sky, Mijia and their respective shareholders to replace their previous contractual
arrangements with Pusida. Such contractual arrangements include technical support service agreements, strategy consulting service agreements and intellectual property license agreements with Hangzhou Sky and Mijia, respectively, and an exclusive
business cooperation agreement with Fanyi.

In addition, in February 2011, through Dianneng, we entered into similar
contractual arrangements with Feineng and its shareholders, which include a technical support service agreement, strategy consulting service agreement and intellectual property license agreement with Feineng. In December 2011, through Tiandian, our
PRC subsidiary, we entered into contractual arrangements with Hangzhou Investment and its shareholder. Such contractual arrangements include a technical support service agreement, strategy consulting service agreement and intellectual property
license agreement with Hangzhou Investment. Under these contractual arrangements, our SPEs pay to Dianneng or Tiandian their earnings in the form of services fees and royalties. Our PRC subsidiaries pay their earnings to our offshore intermediate
holding company primarily through dividends.

The following table sets forth a summary of our net cash flows for the periods
indicated:



|                                                     |  |                              |         |   |      |  |         |      |  |  |          |   |  |  |         |  
|---------------------------------------------------- |  | ---------------------------- | ------- | - | ---- |  | ------- | ---- |  |  | -------- | - |  |  | ------- | -
|                                                     |  | For the Year Ended March 31, |        
|                                                     |  | 2010                         |         |   | 2011 |  |         | 2012 | 
|                                                     |  | RMB                          |         |   | RMB  |  |         | RMB  |  |  | US$      |  
|                                                     |  | (in thousands)               |        
|Net cash provided by operating activities            |  |                              | 160,506 |   |      |  | 133,285 |      |  |  | 57,095   |   |  |  | 9,067   |  
|Net cash used in investing activities                |  |                              | (96,763 | ) |      |  | (97,949 | )    |  |  | (283,889 | ) |  |  | (45,080 | )
|Net cash provided by (used in) financing activities  |  |                              | (16,250 | ) |      |  | 261,073 |      |  |  | 384      |   |  |  | 61      |  
|Net increase (decrease) in cash and cash equivalents |  |                              | 47,493  |   |      |  | 296,409 |      |  |  | (226,410 | ) |  |  | (35,952 | )
|Cash and cash equivalents at beginning of year       |  |                              | 27,618  |   |      |  | 75,105  |      |  |  | 367,214  |   |  |  | 58,311  |  
|Effect of foreign exchange rate changes              |  |                              | (6      | ) |      |  | (4,300  | )    |  |  | (3,266   | ) |  |  | (519    | )
|                                                     |  |                              |         |   |      |  |         |      |  |  |          |   |  |  |         |  
|                                                     |  |                              |         |  
|Cash and cash equivalents at end of year             |  |                              | 75,105  |   |      |  | 367,214 |      |  |  | 137,538  |   |  |  | 21,840  |  
|                                                     |  |                              |         |   |      |  |         |      |  |  |          |   |  |  |         |  



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Cash provided by operating activities was RMB160.5 million, RMB133.3 million and RMB57.1
million in the fiscal years ended March 31, 2010, 2011 and 2012, respectively. This decrease was primarily attributable to a lower gross margin resulting from increased revenue sharing percentages with industry participants and a faster payable
payment process because of the abundant cash-on-hand. The turnover days of trade receivables remained the same during all years. For a detailed reconciliation of our net income to net cash provided by operating activities, please refer to our
consolidated cash flow statements contained in ITEM 18.

We had RMB283.9 million net cash used in investing activities
for the fiscal year ended March 31, 2012 primarily due to RMB285.7 million increase of term deposits and RMB11.3 million purchases of property and equipment, partially offset by RMB12.1 million in interest income. We had RMB97.9 million net
cash used in investing activities for the fiscal year ended March 31, 2011, primarily due to a RMB102.7 million increase of term deposits and RMB42.2 million purchases of property and equipment, partially offset by RMB25.0 million and RMB15.8
million proceeds from receipt of loan receivable and redemption of investments at FVTPL, respectively. We had RMB96.8 million net cash used in investing activities for the fiscal year ended March 31, 2010 primarily consisting of (i) a
RMB35.0 million increase of term deposits, (ii) RMB25.0 million in payments for loan receivable, (iii) RMB16.0 million purchases of property and equipment and (iv) RMB15.0 million in purchase of investment at FVTPL.

We had RMB0.4 million net cash provided by financing activities for the fiscal year ended March 31, 2012 due to the capital
contribution from non-controlling interests. We had RMB261.1 million net cash provided by financing activities for the fiscal year ended March 31, 2011, primarily consisting of (i) RMB303.1 million proceeds from our initial public offering
in December 2010, partially offset by RMB20.4 million of transaction costs and (ii) RMB13.0 million and RMB9.8 million in dividends paid to our common shareholders and preferred shareholders, respectively. We had RMB16.3 million net cash used
in financing activities in the fiscal year ended March 31, 2010 due to the dividends paid to our common shareholders.

Capital
Expenditures

We had capital expenditures of RMB16.0 million, RMB42.2 million and RMB11.3 million (US$1.8 million) in the
fiscal years ended March 31, 2010, 2011 and 2012, respectively, principally used to purchase servers and computers to support the expansion of our business.

We estimate that we will incur approximately RMB6.0 million (US$1.0 million) in capital expenditures in fiscal 2013, primarily for the deployment and maintenance of servers and equipment to support
further development of our Maopao Community and community-based applications and other content.

We anticipate that we will
be able to meet our needs to fund operations for at least the next 12 months with operating cash flow and existing cash balances, including any investments or acquisitions we may decide to pursue. If these sources are insufficient to satisfy cash
requirements, we may seek to sell additional equity or debt securities or to obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to shareholders. The incurrence of indebtedness
would result in increased debt service obligations and could result in operating and financial covenants that would restrict operations. Financing may not be available in amounts or on terms acceptable to us, if at all.

Recently Issued Accounting Pronouncements

We have not early adopted the following new and revised standards, amendments or interpretations that have been issued but are not yet effective:

In November 2009, the IASB issued IFRS 9, Financial Instruments, as the first step in its project to replace IAS 39,
Financial Instruments: Recognition and Measurement. IFRS 9 introduces new requirements for the classification and measurement of financial assets and requires all recognized financial assets that are within the scope of IAS 39 to be
measured at either amortized cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual cash flows that are solely
payments of principal and interest on the principal outstanding, are generally measured at amortized cost. All other debt investments and equity investments are measured at fair value. IFRS 9 will be effective from January 1, 2015, with earlier
application permitted.



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In October 2010, the IASB issued amendments to IFRS 9 Financial Instruments.
The amendments address the accounting for financial liabilities, specifically volatility in the income statement arising from measuring debt at fair value. With the new requirements, an entity choosing to measure a liability at fair value will
present the portion of the change in its fair value due to changes in the entitys own credit risk in the other comprehensive income section of the income statement, rather than within profit or loss. IFRS 9 is effective for financial
statements in annual periods beginning on or after January 1, 2015. Early adoption of the amendments is permitted; however, entities that elect early adoption must also apply the financial asset requirements in IFRS 9.

We anticipate that the adoption of IFRS 9 may impact the amounts reported in respect of our classification and measurement of
available-for-sale investments that are measured at cost less impairment at the end of the reporting period. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed. Currently, we do
not have financial liabilities designated at fair value through profit or loss and, and accordingly IFRS 9 is not expected to have an impact on our financial liabilities.

In May 2011, the IASB issued IFRS 10, Consolidated Financial Statements, which is a replacement of IAS 27, Consolidated and Separate Financial Statements, and SIC-12,
Consolidation  Special Purpose Entities. Concurrent with the issuances of IFRS 10, the IASB also issued IFRS 11 Joint Ventures, IFRS 12 Disclosures of Interests in Other Entities, IAS 27 Separate
Financial Statements (revised 2011) and IAS 28 Investment in Associates and Joint Ventures (revised 2011). IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee,
(b) exposure, or rights, to variable returns from its involvement with the investee and (c) the ability to use its power over the investee to affect the amount of the investors returns.

In May 2011, the IASB issued IFRS 12, Disclosure of Interests in Other Entities, which requires extensive disclosures
relating to an entitys interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. An entity is required to disclose information that users of its financial statements evaluate the nature of and risk
associated with its interests in other entities and the effect of those interests on its financial statements.

The above
standards are effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted provided that all of these standards are applied early at the same time.

We anticipate adopting these standards in our consolidated financial statements for the annual period beginning April 1, 2013.
However, we have not yet performed a detailed analysis of the impact of the application of these standards and hence have not yet quantified the extent of the impact.

In May 2011, the IASB issued IFRS 13, Fair Value Measurement, which establishes a single source of guidance of fair value measurement under IFRSs. IFRS 13 defines fair values, provides
guidance on its determination and introduces consistent requirements for disclosure on fair value measurement. This standard applies to both financial and non-financial items measured at fair value. IFRS 13 is effective for annual periods beginning
on or after January 1, 2013, with early adoption permitted. We are currently evaluating the impact of adoption on our consolidated financial statements.



|C. | Research and Development, Patents and Licenses, etc.
|-- | ----------------------------------------------------

We have an experienced team of engineers. As of March 31, 2012, our research and development staff consisted of 239 software, hardware and system engineers. We recruit our engineers throughout China
and have established various recruiting and training programs with leading universities in China.



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Our senior management team heads our research and development efforts and sets out
strategic directions for the advancement of our offerings. Mr. Li Ou, Mr. Yan Tang, Mr. Wenjie Wu and Mr. Qing Yan are experienced engineers with a successful track record of developing Maopao. Under their guidance, our research
and development plans currently focus on the following areas:



| |  |  | Improving our hardware infrastructure and computational capability. As of March 31, 2012, peak concurrent users of our Maopao Community reached
approximately 333,370. On average, over 1 billion user visits to the Maopao application store occurred every month in fiscal 2012. In order to prevent system malfunctions and downtime that may result from our expanding user base, we focus on
investing in our hardware infrastructure and computational capability to support more mobile users concurrently accessing more diversified applications and content and interacting with each other through Maopao Community.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Developing systematic solutions for community-based applications. We are fine tuning our unified user account management system, which will facilitate
our efforts to provide personalized experience to individual mobile users and enhance their interaction. Recognizing users need to interact on a real-time basis with each other while running other applications, we are developing a systematic
approach to enable concurrent operations of multiple applications and content on mobile handsets.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Developing new versions of Maopao which can be downloaded directly by users and installed on smart phones using the Symbian and Android operating
systems, which will help expand our user base and facilitate interaction among users of these handsets and our existing users.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Improving the capabilities and functionalities of Maopao while enabling users with older versions of Maopao to easily access newly developed
applications. We believe this will enable us to further enrich the applications available on Maopao and capitalize on market growth following the popularization of 3G networks. We will utilize in-house and third-party development capabilities to
diversify our content portfolio, particularly video chat and video streaming related applications.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We
believe that the improvement of our technology is vital to maintaining our long-term competitiveness. We have established laboratories for advanced mobile user experience testing, mobile applications testing and system simulation.

In each of the three years ended March 31, 2010, 2011 and 2012, our research and development expenses were RMB26.9 million,
RMB52.3 million and RMB71.1 million (US$11.3 million), representing 4.9%, 7.7% and 10.4% of our total revenues for the fiscal years ended March 31, 2010, 2011 and 2012, respectively.



|D. | Trend Information
|-- | -----------------

Other
than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from March 31, 2011 to March 31, 2012 that are reasonably likely to materially adversely affect
our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of our future operating results or financial condition.



|E. | Off-Balance Sheet Arrangements
|-- | ------------------------------

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are
indexed to our own shares and classified as shareholders equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing,
hedging or research and development services with us.



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|F. | Contractual Obligations
|-- | -----------------------

The following table sets forth our contractual obligations as of March 31, 2012:



|                            |  |                       |        |  |                 |  |       |           |  |  |           |  |  |                  |     |  |  |  |   | 
|--------------------------- |  | --------------------- | ------ |  | --------------- |  | ----- | --------- |  |  | --------- |  |  | ---------------- | --- |  |  |  | - | 
|                            |  | Payment Due by Period |       
|                            |  | total                 |        |  | Less than1 year |  |       | 1-3 years |  |  | 3-5 years |  |  | More than5 years |    
|                            |  | (in RMB 000)         |       
|Operating lease commitments |  |                       | 24,253 |  |                 |  | 8,211 |           |  |  | 15,118    |  |  |                  | 924 |  |  |  |  | 
|Capital commitments         |  |                       | 1,100  |  |                 |  | 1,100 |           |  |  |          |  |  |                  |    |  |  |  |  | 
|                            |  |                       |        |  |                 |  |       |           |  |  |           |  |  |                  |     |  |  |  |   | 
|                            |  |                       |        |  |                
|Total                       |  |                       | 25,353 |  |                 |  | 9,311 |           |  |  | 15,118    |  |  |                  | 924 |  |  |  |  | 
|                            |  |                       |        |  |                 |  |       |           |  |  |           |  |  |                  |     |  |  |  |   | 



|G. | Safe Harbor
|-- | -----------

This annual
report contains forward-looking statements that relate to future events, including our prospects, our future operating results and our future financial performance and condition, all of which are largely based on our current expectations and
projections. The forward-looking statements are contained principally in the sections entitled Item 3. Key Information  D. Risk Factors, Item 4. Information on the Company and Item 5. Operating and Financial
Review and Prospects. These statements are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by words or phrases such as
may, will, expect, anticipate, aim, estimate, intend, plan, believe, potential, continue, is/are likely
to or other similar expressions.

We have based these forward-looking statements largely on our current expectations
and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among others, statements relating
to: our business strategies and initiatives as well as our business plans; our future business development, results of operations and financial condition; expected changes in our revenues and certain cost or expense items; our expectations with
respect to increased revenue growth and our ability to sustain profitability; our products under development or planning; our ability to attract clients and further enhance our brand recognition; and trends and competition in the mobile applications
industry.

This annual report also contains data related to the mobile applications industry in China, including projections
that are based on a number of assumptions. These market data include market data from the 2011 Analysys Report. The mobile applications industry in China may not grow at projected rates, or at all. The failure of the market to grow at projected
rates may materially adversely affect our business and the market price of our ADSs. In addition, the rapidly changing nature of the mobile applications industry in China subjects any projections or estimates relating to the growth prospects or
future condition of our market to significant uncertainties. If any one or more of the assumptions underlying the market projections turns out to be incorrect, our actual results may differ from the projections based on these assumptions. You should
not place undue reliance on these forward-looking statements.

The forward-looking statements made in this annual report
relate only to events or information as of the date on which the statements are made in this annual report on Form 20-F. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report on Form 20-F in its entirety and review the factors and
risks we describe in reports we will file from time to time with the SEC after the date of this annual report. See Item 10. Additional Information  H. Documents on Display. with the understanding that our actual future results may
be materially different from what we expect. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor
can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.



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|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | ------------------------------------------



|A. | Directors and Senior Management
|-- | -------------------------------

The following table sets forth information regarding our directors and executive officers as of the date of this annual report.



|                                 |  |     |  |                                              
|-------------------------------- |  | --- |  | ---------------------------------------------
|Directors and Executive Officers |  | Age |  | Position/Title                               
|Michael Tao Song                 |  | 35  |  | Founder, Chairman and Chief Executive Officer
|Li Ou                            |  | 33  |  | Director and Chief Technology Officer        
|Kui Zhou                         |  | 44  |  | Independent Director                         
|Wei Zhou                         |  | 33  |  | Independent Director                         
|Fan Bao                          |  | 41  |  | Independent Director                         
|Carl Yeung                       |  | 32  |  | Chief Financial Officer                      
|Qing Yan                         |  | 30  |  | Chief Operating Officer                      
|Yan Tang                         |  | 33  |  | Terminal Technology Director                 
|Steven Bin Li                    |  | 37  |  | Vice President                               
|Xing Fan                         |  | 35  |  | Vice President                               
|Walker Yuangang Wu               |  | 34  |  | Vice President                               

Mr. Michael Tao Song is our founder, chairman and chief executive officer.
Mr. Song was appointed as a director by Xplane Ltd., a holder of our common shares. Prior to founding our company, Mr. Song worked as a product director at Eastcom Communications Co., Ltd., a telecommunications technology company listed on
the Shanghai Stock Exchange, from 2000 to 2005. Mr. Song received his bachelors degree in applied mathematics from Tianjin University in 2000.

Mr. Li Ou has been a director of our company since June 2007 and our chief technology officer since November 2006. Mr. Ou was appointed as a director by Xplane Ltd. Prior to
joining us, Mr. Ou worked as a software testing engineer at Eastcom Communications Co., Ltd. from 2001 to 2006. Mr. Ou received his bachelors degree in communication engineering from Nanjing University of Posts and Telecommunications
in 2001.

Mr. Kui Zhou has been an independent director of our company since August 2007. Mr. Zhou
was appointed as a director by Sequoia Capital China II, L.P., Sequoia Capital China Partners II, L.P. and Sequoia Capital China Principals II, L.P., our shareholders. Mr. Zhou has been a principal of Sequoia Capital China since 2005 and a
partner of Sequoia Capital China since May 2007. He is also a director of VanceInfo Technologies Inc., a China-based IT service provider listed on the New York Stock Exchange, and a director of Xiamen Changelight Co., Ltd., a China-based LED and
solar cell research and manufacturing company listed on the Growth Enterprises Market of the Shenzhen Stock Exchange. He also serves on the board of several privately held companies, including HDT Holding Technologies Inc., a China-based online
advertising and marketing company; Shanghai Hintsoft Software Co., Ltd., a China-based Internet cafe software provider; and Beijing Speedpay Technology Co., Ltd., a high-tech company committed to wireless payment and mobile e-commerce business, all
of which are invested by Sequoia Capital China. Prior to joining Sequoia Capital China, Mr. Zhou served as a senior vice president at Legend Capital from 2001 to 2005. From 1999 to 2001, he served as a manager of the corporate business
development department of Legend Holdings Ltd. Mr. Zhou received his bachelors degree in electrical automation from Wuhan Technology University in 1989 and his masters of business administration degree from Tsinghua University in
2000.

Mr. Wei Zhou has served as our independent director since December 2010. Mr. Zhou has served
as the chief financial officer of Charm Communications Inc., a leading domestic television advertising agency in China listed on the NASDAQ Global Market, since November 2009. Mr. Zhou was the chief financial officer of Zhaopin Limited, which
operates a China-based online recruitment website (www.zhaopin.com), from June 2008 to October 2009. Mr. Zhou also served as Zhaopin Limiteds director of strategic planning from July 2005 to May 2007. Mr. Zhou served as an associate
director with Abax Global Capital, a Hong Kong based investment fund focusing on direct investments in private and public-sector Chinese companies, from June 2007 to May 2008. From 2001 to 2005, Mr. Zhou worked in the Hong Kong office of
Goldman Sachs in the investment banking division and the Asian Special Situations Group. Mr. Zhou received his bachelors degree from Harvard University in 2001.



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Mr. Fan Bao has served as our independent director since February 2011.
Mr. Bao is the founder and chief executive officer of China Renaissance Partners, a leading boutique investment bank in China. Prior to founding China Renaissance Partners in 2004, Mr. Bao was the chief strategy officer of AsiaInfo
Holdings, Inc., an IT service and software company in China. Prior to that, Mr. Bao worked at the investment banking divisions of Morgan Stanley and Credit Suisse for seven years. Mr. Bao received a bachelors degree from Fudan
University in Shanghai and a masters degree from Norwegian School of Management.

Mr. Carl Yeung has
been our chief financial officer since February 2010. Prior to joining us, Mr. Yeung was the chief financial officer of ATA Inc., a computer-based testing and testing-related service provider based in China and listed on the NASDAQ Global
Market, from 2006 to 2010. From 2002 to 2006, Mr. Yeung worked as an analyst and associate at Merrill Lynch (Asia Pacific) Limited. Mr. Yeung also served as an independent non-executive director of China Natural Gas, Inc., a NASDAQ-listed
integrated natural gas operator in China, from 2008 to November 2010. Mr. Yeung received his bachelors degree in economics with concentrations in finance and operations management from the Wharton School, University of Pennsylvania, and
his bachelors degree in applied science with a concentration in systems engineering from the School of Engineering and Applied Sciences, University of Pennsylvania, in 2002.

Mr. Qing Yan has been our chief operating officer, responsible for oversight of the operation and management of our
application store and online games businesses, since February 2012. Mr. Yan was our vice president in charge of overseas business from September 2007 until becoming our chief operating officer. From 2005 to 2007, Mr. Yan was a software
engineering at Texas Instruments (Shanghai) Co., Ltd., a semiconductor company. From 2001 to 2005, Mr. Yan worked at Eastcom Communications Co., Ltd. with his last role as a software manager. Mr. Yan received his bachelors degree in
computer science and technology from Huazhong University of Science and Technology in 2001.

Mr. Yan Tang
has been our terminal technology director since June 2006. Prior to joining us, Mr. Tang served as a software manager at Eastcom Communications Tianyu Mobile Technology Co., Ltd., a subsidiary of Eastcom Communications Co., Ltd., from 2004 to
2006. From 2003 to 2004, Mr. Tang worked at the Terminal Research Institute of Eastcom Communications Co., Ltd., with his last role as a manager of telecommunication value-added service. Mr. Tang received his bachelors degree in
computer software from Xidian University in 2001.

Mr. Steven Bin Li has been our vice president of
finance since March 2010. Prior to joining us, Mr. Li was a partner of Beijing Tuowei Business Consulting Co., Ltd., a China-based business consulting company, from 2009 to 2010. Prior to that, Mr. Li served as the financial director of
Longtop Financial Technologies Limited, a Chinese software development and solutions provider listed on the New York Stock Exchange, from 2007 to 2009. From 2002 to 2007, Mr. Li served as the financial director of the Beijing Branch of
Ogilvy & Mather, an advertising, marketing and public relations agency. Prior to that, Mr. Li worked for nearly six years as an audit manager at PricewaterhouseCoopers Zhong Tian CPAs Limited Company in Beijing and Singapore.
Mr. Li received his bachelors degree in auditing from Capital University of Economics and Business in 1996 and studied at the Guanghua School of Management of Peking University between 2002 and 2004.

Dr. Xing Fan has been our vice president of development & engineering since August 2008. Prior to joining us, Dr.
Fan worked at Net263 Co., Ltd., a Chinese domestic internet service provider and value-added application operator, with his last role as the vice general manager and technology director of voice over internet protocol, or VoIP, and video
entertainment society business unit, from 2005 to 2008. From 2003 to 2005, Dr. Fan co-founded Hangzhou AETECO Technology Co., Ltd., a Chinese domestic video communication solution vendor and service provider, and served as the chief technology
officer and executive vice president. Prior to that, Dr. Fan served as the technology director and chief engineer of Hangzhou Holley Broadband Information Technology Co., Ltd., a Chinese domestic broadband solution vendor and metropolitan area
network operator, from 2001. Dr. Fan received his bachelors degree in information and electronic engineering in 1999 and his Ph.D. in communication and information system engineering in 2006, both from Zhejiang University.



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Mr. Walker Yuangang Wu has been our vice president in charge of our
channel management since February 2011. Mr. Wu has been our general manager of channel business since January 2010, responsible for channel marketing, business development, and channel products management as well as R&D management of
channel products. Mr. Wu was first the head of Huanan district (Shenzhen representative office) and then the director of channel department at Sky-mobi. Prior to joining Sky-mobi, from 2002 to 2005, Mr. Wu worked as product department
manager at Eastcom Communications Co., Ltd, a telecommunication technology company listed on the Shanghai Stock Exchange. From 2005 to 2007, Mr. Wu served as the product director at Eastcom Baifeng Technology Co., Ltd, a subsidiary of Eastcom
Communications Co., Ltd. Mr. Wu received his bachelors degree in international trade from Hangzhou Business School (later renamed Hangzhou University of Commerce) in 2002.



|B. | Compensation of Directors and Executive Officers
|-- | ------------------------------------------------

For the fiscal year ended March 31, 2012, we paid an aggregate of approximately RMB6.5 million (US$1.0 million) in cash to our executive officers, and we did not pay any cash compensation to our
non-executive directors. For options granted to our executive officers, see  Share Incentive Plan.

We have
not set aside or accrued any amount of cash to provide pension, retirement or other similar benefits to our officers and directors. Our PRC subsidiaries and SPEs are required by law to make contributions equal to certain percentages of each
employees salary for his or her retirement benefit, medical insurance benefits, housing funds, unemployment and other statutory benefits. Our subsidiaries and the SPEs contributed an aggregate of approximately RMB20,000 (US$3,176) for
retirement and similar benefits for our officers and directors in fiscal 2012.

Share Incentive Plan

We have adopted our 2010 Share Incentive Plan, or the 2010 Plan, to motivate, attract, and retain employees, directors and consultants,
and promote the success of our business. The maximum number of common shares which could originally be issued pursuant to all awards under the 2010 Plan was 15,000,000. The amount increases annually on the first business day of each calendar year by
an amount equal to the lesser of (x) one percent of the number of common shares outstanding as of such date, or (y) a lesser number of common shares determined by the compensation committee; provided, however, that no more than 15,000,000
shares may be issued upon the exercise of incentive options. As of March 31, 2012, the aggregate number of common shares underlying our outstanding options under the 2010 Plan was 8,521,650.

Types of Awards. The types of awards we may grant under the 2010 Plan include, among others, options, restricted shares
and restricted share units.

Plan Administration. The compensation committee of our board of directors
administers the 2010 Plan, and may delegate its administrative authority to a committee of one or more members of our board or one or more of our officers, subject to certain restrictions. The compensation committee will designate the eligible
individuals who may receive awards, and determine the types and number of awards to be granted and the terms and conditions of each award grant, including, but not limited to, the exercise price, grant price or purchase price, any reload provision,
any restrictions or limitations on the award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an award and accelerations or waivers thereof, any provisions related to non-competition and recapture
of gain on an award, based in each case on such considerations as the committee in its sole discretion determines. The compensation committee has the sole power and discretion to cancel, forfeit or surrender an outstanding award.

Award Agreements. Options and other awards granted under the 2010 Plan are evidenced by a written award agreement that
sets forth the material terms and conditions for each grant.

Eligibility. We may grant awards to employees,
consultants of a service recipient, which includes our subsidiaries or any affiliated entities designated by our board for purposes of the 2010 Plan, as well as our non-employee directors.



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Acceleration of Awards upon Corporate Transactions. The compensation
committee may, in its sole discretion, upon or in anticipation of a corporate transaction, accelerate awards, purchase the awards from the holder or replace the awards.

Vesting Schedule. In general, the compensation committee determines, or the relevant award agreement specifies, the vesting schedules.

Amendment and Termination. The compensation committee may at any time amend, modify or terminate the 2010 Plan. Amendments
to the 2010 Plan are subject to shareholder approval to the extent required by law or security exchange rules. In addition, shareholder approval is specifically required to increase the number of shares available under the 2010 Plan, or to permit
the compensation committee to extend the term or the exercise period of an option beyond ten years, or if amendments result in material increases in benefits or a change in eligibility requirements. Any amendment, modification or termination of the
2010 Plan must not impair any rights or obligations under awards already granted without consent of the holder of such awards. Unless terminated earlier, the 2010 Plan will expire and no further awards may be granted after the tenth anniversary of
the shareholders approval of the 2010 Plan.

The following table summarizes, as of the date of this annual report, the
outstanding options that we have granted our executive officers and other individuals as a group under the 2010 Plan.



|                                            |  |                                            |           |  |                           |  |      |            |  |                    |  |  |    | 
|------------------------------------------- |  | ------------------------------------------ | --------- |  | ------------------------- |  | ---- | ---------- |  | ------------------ |  |  | -- | 
|Name                                        |  | Common SharesUnderlyingOutstanding Options |           |  | Exercise Price(US$/Share) |  |      | Grant Date |  | Expiration Date    | 
|                                            |  |                                            |           | 
|Carl Yeung                                  |  |                                            | *         |  |                           |  | 0.26 |            |  | March 1, 2010      |  |  | ** | 
|                                            |  |                                            | *         |  |                           |  | 0.26 |            |  | September 15, 2010 |  |  | ** | 
|Steven Bin Li                               |  |                                            | *         |  |                           |  | 0.26 |            |  | March 1, 2010      |  |  | ** | 
|                                            |  |                                            | *         |  |                           |  | 0.26 |            |  | September 15, 2010 |  |  | ** | 
|Xing Fan                                    |  |                                            | *         |  |                           |  | 0.26 |            |  | March 1, 2010      |  |  | ** | 
|Directors and Executive officers as a group |  |                                            | 2,040,000 |  |                           |  | 0.26 |            |  | March 1, 2010      |  |  | ** | 
|                                            |  |                                            | 500,000   |  |                           |  | 0.26 |            |  | September 15, 2010 |  |  | ** | 
|                                            |  |                                            | 100,000   |  |                           |  | 1.00 |            |  | January 6, 2011    |  |  | ** | 
|                                            |  |                                            | 100,000   |  |                           |  | 1.00 |            |  | January 9, 2011    |  |  | ** | 
|Other individuals as a group                |  |                                            | 2,968,600 |  |                           |  | 0.26 |            |  | March 1, 2010      |  |  | ** | 
|                                            |  |                                            | 926,800   |  |                           |  | 0.26 |            |  | April 1, 2010      |  |  | ** | 
|                                            |  |                                            | 1,886,250 |  |                           |  | 0.26 |            |  | September 15, 2010 |  |  | ** | 



|* | Less than 1% of our outstanding common shares.
|- | ----------------------------------------------

|** | The expiration date for the options is the earlier of the tenth anniversary of the grant date of such options or upon the termination of the optionholders
services by reason of cause, or two years following the termination of the optionholders services by reason of death or disability, or 90 days following the termination of the optionholders services for any reason other than death or
disability and not for cause.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|C. | Board Practices
|-- | ---------------

Board of Directors

Our board of directors consists of five members. A director is not required to hold any shares in our company by way of
qualification. A director may vote with respect to any contract or transaction in which he or she is materially interested provided the nature of the interest is disclosed prior to its consideration and any vote on such contract or transaction. The
directors may exercise all the powers of our company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities whether outright or as security for any debt, liability or obligation of our
company or of any third-party. None of our non-executive directors has a service contract with us that provides for benefits upon termination of employment.



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Committees of the Board of Directors

We have three committees under the board of directors: an audit committee, a compensation committee and a corporate governance and
nominating committee. We have adopted a charter for each of the three committees.

Audit Committee

Our audit committee consists of Wei Zhou and Fan Bao. Wei Zhou and Fan Bao satisfy the independence requirements of Rule 5605
of the NASDAQ Stock Market Marketplace Rules and Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Wei Zhou is the chairman of our audit committee and meets the criteria of an audit committee financial expert as set forth under the
applicable rules of the SEC. Our audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. Our audit committee is responsible for, among other things:



| |  |  | selecting our independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by our
independent registered public accounting firm;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviewing with the independent registered public accounting firm any audit problems or difficulties and managements response;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviewing and approving all proposed related-party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | discussing the annual audited financial statements with management and our independent registered public accounting firm;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | annually reviewing and reassessing the adequacy of our audit committee charter;
| | - |  | -------------------------------------------------------------------------------



| |  |  | meeting separately and periodically with management and our independent registered public accounting firms;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | reporting regularly to the full board of directors; and
| | - |  | -------------------------------------------------------



| |  |  | performing such other matters that are specifically delegated to our audit committee by our board of directors from time to time.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

Compensation Committee

Our compensation committee consists of Kui Zhou, Wei Zhou, and Fan Bao. Kui Zhou, Wei Zhou and Fan Bao satisfy the independence requirements of Rule 5605 of the NASDAQ Stock Market Marketplace
Rules. Our compensation committee assists the board of directors in reviewing and approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive
officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things:



| |  |  | reviewing and making recommendations to the board with respect to the total compensation package for our four most senior executives;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | approving and overseeing the total compensation package for our executives other than the four most senior executives;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | reviewing and making recommendations to the board with respect to the compensation of our directors; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | reviewing periodically and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee
pension and welfare benefit plans.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Corporate Governance and Nominating Committee

Our corporate governance and nominating committee consists of Wei Zhou, Kui Zhou and Fan Bao. All of them satisfy the
independence requirements of Rule 5605 of the NASDAQ Stock Market Marketplace Rules. The corporate governance and nominating committee assists our board of directors in identifying individuals qualified to become our directors and in
determining the composition of the board and its committees. The corporate governance and nominating committee is responsible for, among other things:



| |  |  | identifying and recommending nominees for election or re-election to our board of directors, or for appointment to fill any vacancy;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reviewing annually with our board of directors its current composition in light of the characteristics of independence, age, skills, experience and
availability of service to us;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | identifying and recommending to our board the directors to serve as members of committees;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | advising the board periodically with respect to significant developments in the law and practice of corporate governance as well as our compliance with
applicable laws and regulations, and making recommendations to our board of directors on all matters of corporate governance and on any corrective action to be taken; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure
proper compliance.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

Duties of Directors

Under Cayman Islands law, our directors have a fiduciary duty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the skill they actually
possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, amended
from time to time.

Terms of Directors and Officers

Pursuant to our amended and restated memorandum and articles of incorporation, our board of directors are divided into three classes, Class A directors, Class B directors and Class C directors, who
shall retire from office and be eligible for re-election at the first, second and third annual general meeting, respectively. Mr. Michael Tao Song and Mr. Li Ou have been designated as Class A directors. Mr. Kui Zhou and
Mr. Wei Zhou have been designated as Class B directors. Mr. Fan Bao has been designated as a Class C director. At each subsequent annual general meeting after the third annual general meeting, the directors of the class who have been
longest in office shall retire and shall be eligible for re-election. A director may only be removed by the shareholders. Officers are elected by and serve at the discretion of the board of directors.



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Employment Agreements

We have entered into a three-year employment agreement with each of our executive officers. We may terminate an executive officers employment for cause, at any time, without prior notice or
remuneration, for certain acts of the officer, including, but not limited to, conviction of a crime, material violation of our rules and regulations, or other misconduct that causes material damage to us. Furthermore, an executive officer may
terminate the employment at any time upon prior written notice to us. Each executive officer is entitled to severance pay equal to a certain specified number of months of his base salary if we terminate his employment without any of the causes
specified above.

Each of our executive officers has agreed to hold in strict confidence any trade secrets or confidential
information of our company or trade secrets of any third-party received by us. Each executive officer has agreed that the intellectual property rights related to all work products, inventions, computer software or other technological information
which he has developed while performing his duties at our company or through mainly using our resources shall belong to us. Each executive officer has agreed to assist us to obtain and exercise all such intellectual property rights.



|D. | Employees
|-- | ---------

We had 331,
534 and 583 full-time employees as of March 31, 2010, 2011 and 2012, respectively. We consider our relations with our employees to be good. The following table sets forth the number of our employees categorized by areas of operations as of
March 31, 2012:



|                                                 |  |                     |     |  |            |  |       | 
|------------------------------------------------ |  | ------------------- | --- |  | ---------- |  | ----- | 
|Function                                         |  | Number of Employees |     |  | Percentage | 
|                                                 |  |                    
|Research and development                         |  |                     | 239 |  |            |  | 41.0  | 
|Sales and marketing (including customer service) |  |                     | 80  |  |            |  | 13.7  | 
|Operations                                       |  |                     | 169 |  |            |  | 29.0  | 
|General and administration                       |  |                     | 95  |  |            |  | 16.3  | 
|                                                 |  |                     |     |  |            |  |       | 
|                                                 |  |                    
|Total                                            |  |                     | 583 |  |            |  | 100.0 | 
|                                                 |  |                     |     |  |            |  |       | 

Our success depends on our ability to attract, retain and motivate qualified personnel. We believe we
offer our employees competitive compensation packages, and we have generally been able to attract and retain qualified personnel and maintain a stable core management team. We believe that we maintain a good working relationship with our employees
and we have not experienced any significant labor disputes. For a description of the employment agreement we signed with some members of our senior management, see Item 6. Director, Senior Management and Employees  C. Board
Practices  Employment Agreements.

Substantially all of our employees are based in the PRC. In accordance with
PRC laws, our full-time employees in China participate in various employee benefit plans including pension, medical benefit plans, unemployment insurance, work-related injury insurance and childbirth insurance.

Compensation for our full-time employees typically consists of a base salary, seniority pay and other subsidies. In addition, based on
our results of operations, we may award bonuses to our employees solely at our discretion. Our employees are also eligible for equity incentives. For more information on the terms of our share incentive plan, see Item 6. Director, Senior
Management and Employees  B. Compensation of Directors and Executive Officers  Share Incentive Plan.

We hire a portion of our employees through on-campus recruiting programs at various universities, including Zhejiang University,
Zhejiang Sci-Tech University, Nanjing University, Nanjing University of Science and Technology, Huazhong University of Science and Technology, Wuhan University of Zhejiang University of Technology, Northwest Hangzhou Electronics University, and
Xian Jiaotong University.



91



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##### Table of Contents

|E. | Share Ownership
|-- | ---------------

As of
June 29, 2012, there were 261,389,800 common shares outstanding. The following table sets forth information with respect to the beneficial ownership of our common shares as of March 31, 2012, by:



| | (1) | each of our directors and executive officers who are also our shareholders; and
| | --- | -------------------------------------------------------------------------------



| | (2) | each person known to us to own beneficially more than 5% of our common shares.
| | --- | ------------------------------------------------------------------------------



|                                                   |  |                                  |             |  |   |  |      |  
|-------------------------------------------------- |  | -------------------------------- | ----------- |  | - |  | ---- | -
|                                                   |  | Common Shares Beneficially Owned |            
|                                                   |  | Number                           |             |  | % | 
|Directors and Executive Officers:                  |  |                                  |             |  |   |  |      |  
|Michael Tao Song(1)                                |  |                                  | 149,200,000 |  |   |  | 57.1 |  
|Li
Ou(2)                                           |  |                                  | 26,463,604  |  |   |  | 10.1 |  
|Yan Tang(3)                                        |  |                                  | 9,829,296   |  |   |  | 3.8  |  
|Kui Zhou(4)                                        |  |                                  | 33,389,800  |  |   |  | 12.8 |  
|Wei Zhou(5)                                        |  |                                  |            |  |   |  |     |  
|Carl Yeung                                         |  |                                  |            |  |   |  |     |  
|Steven Bin Li                                      |  |                                  |            |  |   |  |     |  
|Xing Fan(6)                                        |  |                                  | *           |  |   |  | *    |  
|Qing Yan(7)                                        |  |                                  | *           |  |   |  | *    |  
|All Directors and Executive Officers as a Group(8) |  |                                  | 222,347,124 |  |   |  | 69.9 | %
|                                                   |  |                                 
|Principal Shareholders:                            |  |                                  |             |  |   |  |      |  
|Xplane Ltd.(9)                                     |  |                                  | 149,200,000 |  |   |  | 57.1 |  
|Sequoia Capital China II, L.P.(10)                 |  |                                  | 27,990,688  |  |   |  | 10.7 |  
|Sequoia Capital China Principals Fund II, L.P.(10) |  |                                  | 4,701,352   |  |   |  | 1.8  |  
|Sequoia Capital China Partners Fund II, L.P.(10)   |  |                                  | 697,760     |  |   |  | 0.3  |  



|* | Less than 1% of our total outstanding shares.
|- | ---------------------------------------------

|(1) | Represents 149,200,000 common shares held by Xplane Ltd., a British Virgin Islands company controlled by Mr. Song and his wife.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents 26,463,604 common shares of the 149,200,000 common shares held by Xplane Ltd. Mr. Ou holds a 17.737% interest in Xplane Ltd. Mr. Ou disclaims
beneficial ownership with respect to the shares held by Xplane Ltd. except to the extent of his pecuniary interest therein.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents 9,829,296 common shares of the 149,200,000 common shares held by Xplane Ltd. Mr. Tang holds a 6.588% interest in Xplane Ltd. Mr. Tang disclaims
beneficial ownership with respect to the shares held by Xplane Ltd. except to the extent of his pecuniary interest therein.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents 33,389,800 common shares held by the Sequoia Funds. Mr. Zhou disclaims beneficial ownership with respect to the shares held by the Sequoia Funds except
to the extent of his pecuniary interest therein. The business address for Mr. Zhou is Room 3606, Tower 3, China Central Place, No 77 Jianguo Road, Chaoyang District, Beijing 100025, Peoples Republic of China.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The business address for Mr. Zhou is 26/F, Tower A, Oriental Media Center, 4 Guanghua Road, Chaoyang District, Beijing 100026, Peoples Republic of China.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Represents certain common shares of the 149,200,000 common shares held by Xplane Ltd. and corresponds to the ownership held in Xplane Ltd. by Mr. Fan. Mr. Fan
disclaims beneficial ownership with respect to the shares held by Xplane Ltd. except to the extent of his pecuniary interest therein.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Represents certain common shares of the 149,200,000 common shares held by Xplane Ltd. and corresponds to the ownership held in Xplane Ltd. by Mr. Yan. Mr. Yan
disclaims beneficial ownership with respect to the shares held by Xplane Ltd. except to the extent of his pecuniary interest therein.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Represents common shares held by all of our directors and executive officers as a group.
|--- | ----------------------------------------------------------------------------------------

|(9) | The registered address for Xplane Ltd. is Romasco Place, Wickhams Cay 1, P. O. Box 3140, Road Town, Tortola, British Virgin Islands, VG1110.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Each of the Sequoia Funds is a limited partnership incorporated in Cayman Islands. The general partner of each of the Sequoia Funds is Sequoia Capital China Management
II, L.P., whose general partner is SC China Holding Limited, a company incorporated in the Cayman Islands. SC China Holding Limited is wholly owned by Max Wealth Enterprises Limited, a British Virgin Islands company wholly owned by Neil Nanpeng
Shen. Mr. Shen disclaims beneficial ownership with respect to the shares held by each of the Sequoia Funds except to the extent of his pecuniary interest therein. Mr. Shen has voting and dispositive control over the shares being offered by
the Sequoia Funds. The address of each of the Sequoia Funds is Suite 2215, Two Pacific Place, 88 Queensway, Hong Kong, PRC.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



|A. | Major Shareholders
|-- | ------------------

See
Item 6. Directors, Senior Management and Employees  E. Share Ownership.



|B. | Related Party Transactions
|-- | --------------------------

Contractual Arrangements

PRC law restricts foreign ownership of businesses providing telecommunications value-added services. To comply with PRC law, we operate
our mobile application store through Diannengs contractual arrangements with Hangzhou Sky, Mijia, Fanyi, Feineng, Hangzhou Investment and their respective shareholders. See Item 4. Information on the Company  C. Organizational
Structure for a description of these contractual arrangements.

Private Placement and Warrants

In July 2007, we entered into a share and warrant purchase agreement, which was amended in March 2010. Pursuant to the purchase agreement
and its amendment in March 2010, we issued and sold to Sequoia Capital China II, L.P. an aggregate of 50,000,000 Series A preferred shares at a price of US$0.07 per share for a consideration of US$3.5 million. In March 2010, we further
agreed to issue and sell 4,191,600, 704,000 and 104,400 common shares to Sequoia Capital China II, L.P., Sequoia Capital China Principals Fund II, L.P., and Sequoia Capital China Partners Fund II, L.P., respectively, in consideration of
their agreement on modification of the Series A preferred shares rights relating to our option issuance. We subsequently issued these shares to them in July 2010. All of the then issued and outstanding Series A preferred shares were
converted into 50,000,000 common shares automatically upon the completion of our initial public offering in December 2010.

In July 2007, we issued a warrant to purchase Series A preferred shares, which was amended in September 2008 and further amended
and restated in June 29, 2009. Under the warrant to purchase Series A preferred shares, as amended, we granted each of Sequoia Capital China II, L.P., Sequoia Capital China Principals Fund II, L.P., and Sequoia Capital China Partners
Fund II, L.P. warrants to purchase 2,841,600, 477,400 and 70,800 of our Series A preferred shares, respectively, at a price of US$0.1475 per share, subject to adjustment based on, among other things, dividends declared on, and
subdivisions, combinations, or reclassifications of, the Series A preferred shares. All the warrants expired and became unexercisable upon completion of our initial public offering in December 2010.

Shareholders Agreement

Pursuant to our shareholders agreement entered into in August 2007, as amended and restated, we have granted certain registration rights
to holders of our registrable securities, which include our common shares issued upon conversion of our preferred shares, including preferred shares issued upon exercise of our warrants. Set forth below is a description of the registration rights
granted under the agreement.

Demand Registration Rights. Holders of at least 50% of the registrable securities then
outstanding have the right to demand that we file a registration statement for at least 20% of the registrable securities then held by such holders (or any lesser percentage if the anticipated gross proceeds from the offering exceed US$5,000,000).
However, we are not obliged to effect a demand registration if we have already effected two demand registrations.

Form
F-3 or Form S-3 Registration Rights. At any time when we are eligible for registration on Form F-3 or Form S-3, holders of our registrable securities then outstanding have the right to request that we file a registration statement under Form F-3
or Form S-3. However, we are not obliged to effect any such registration if we have already effected two registrations on Form F-3 or Form S-3 for the holders within the 12-month period preceding the date of request.



93



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Deferral of Registration. We are not obligated to effect the above demand
registration or Form F-3 or Form S-3 registration (i) if we intend to effect the filing for our own account of a registration statement of common shares within 60 days of receipt of a request, and we are actively employing in good faith our
reasonable best efforts to cause such registration statement to become effective within 60 days of initial filing, or (ii) during the period starting with the date of filing by us of, and ending six months following the effective date of, any
registration statement pertaining to our common shares, provided that in either case, the holders of registrable securities are entitled to join such registration under the piggyback registration rights described below. Furthermore, we have the
right to defer filing a registration statement for up to 90 days under demand registration rights or up to 60 days under Form F-3 or Form S-3 registration rights if we provide the requesting holders a certificate signed by our chief executive
officer stating that in the good faith judgment of the board of directors filing a registration statement will be detrimental to us and our shareholders, but we cannot exercise the deferral right more than once in any 12-month period.

Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities other than
pursuant to a demand registration right or an F-3 or S-3 registration statement, or relating to an employee benefit plan or a corporate reorganization, then we must offer holders of registrable securities an opportunity to include in this
registration all or any part of their registrable securities.

Expenses of Registration. All registration expenses
incurred in connection with any demand, piggyback or F-3 or S-3 registration, other than any underwriting discounts and selling commissions, shall be borne by us.

Share Vesting Agreement

In August 2007, we entered into a Share Vesting
Agreement with Xplane Ltd. and each of the individual shareholders of Xplane Ltd., pursuant to which we have the right to repurchase, from Xplane Ltd., up to 75,000,000 restricted shares, at the par value of US$0.00005 per share, in the event
of a voluntary or involuntary termination of the individual shareholders respective employment with us. These restricted shares shall be released from the restriction over a period of thirty-six months, with one thirty-sixth (1/36) of the
restricted shares being released from the restriction at the end of each calendar month period on a pro-rata basis.

Non-competition and
Non-solicitation Agreement

In August 2007, we entered into a non-competition and non-solicitation agreement with all of
the then individual shareholders of Xplane Ltd. in connection with the issuance of our Series A preferred shares. Under the non-competition and non-solicitation agreement, each of the then individual shareholders of Xplane Ltd., for a period
until two years after the last day such individual shareholder holds any equity interest of us, shall not engage or participate in, or induce any of our employees to engage or participate in, any business activities anywhere in the world, directly
or indirectly in competition with us.

Confidential Information Agreement

In August 2007, we entered into a confidential information agreement with all of the then individual shareholders of Xplane Ltd. in
connection with the issuance of our Series A preferred shares. Under the confidential information agreement, each of the individual shareholder of Xplane Ltd., for a period until two years after termination of such shareholders employment
or shareholding relationship with us, shall not use or exploit, disclose, publish or otherwise disseminate any confidential information.

Employment Agreement

We have entered into employment agreements with each of our management members and each of the individual shareholders of Xplane Ltd. For
a description of the employment agreement with our management, see Item 6. Directors, Senior Management and Employees  C. Board Practices  Employment Agreements.



94



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Transactions with Certain Officers, Shareholders and Affiliates and Key Management Personnel

In 2009 and 2010, we obtained licenses for certain mobile content from Zhang Xing Wu Xian Technologies (Beijing) Co.,
Ltd., or Zhang Xing, and Hangzhou Sibi Technologies Co., Ltd., or Sibi, two content providers. We hold a 37% and 33% equity interest in Zhang Xing and Sibi, respectively. The following table sets forth the related cost of revenues we have recorded
for the periods indicated:



|           |  |                              |     |  |      |  |       |      |  |  |       |  |  |  |     | 
|---------- |  | ---------------------------- | --- |  | ---- |  | ----- | ---- |  |  | ----- |  |  |  | --- | 
|           |  | For the Year Ended March 31, |    
|           |  | 2010                         |     |  | 2011 |  |       | 2012 | 
|           |  | RMB                          |     |  | RMB  |  |       | RMB  |  |  | US$   | 
|           |  | (in thousands)               |    
|Zhang Xing |  |                              | 468 |  |      |  | 1,559 |      |  |  | 1,822 |  |  |  | 289 | 
|Sibi       |  |                              | 777 |  |      |  | 1,856 |      |  |  | 3,724 |  |  |  | 591 | 

In addition, we have certain amounts due to and from the related parties, namely Zhang Xing, Sibi, Mr.
Michael Tao Song, our chairman and chief executive officer, Shenzhen Feidong Technologies Co., Ltd., a PRC company controlled by a family member of Mr. Michael Tao Song, the Sequoia Funds, our shareholder and Xplane Ltd., our principle
shareholder. The following table sets forth the amounts due to and from those related parties for the periods indicated:



|                                       |  |                                                                                  |  |                                     |       |  |      |  |     |      |  |  |     |  |  |  |    | 
|-------------------------------------- |  | -------------------------------------------------------------------------------- |  | ----------------------------------- | ----- |  | ---- |  | --- | ---- |  |  | --- |  |  |  | -- | 
|                                       |  |                                                                                  |  | For the Fiscal Year Ended March 31, |      
|                                       |  |                                                                                  |  | 2010                                |       |  | 2011 |  |     | 2012 | 
|                                       |  |                                                                                  |  | RMB                                 |       |  | RMB  |  |     | RMB  |  |  | US$ | 
|                                       |  |                                                                                  |  | (In thousands)                      |      
|                                       |  |                                                                                  |  |                                     |      
|Amounts Due from Related Parties       |  | Nature of Advances or Payment                                                    |  |                                     |       |  |      |  |     |      |  |  |     |  |  |  |    | 
|Zhang Xing                             |  | Non-trading in nature, unsecured, interest-free advances and repayable on demand |  |                                     | 153   |  |      |  | 489 |      |  |  |    |  |  |  |   | 
|Mr. Michael Tao Song                   |  | Non-trading in nature, unsecured, interest-free advances and repayable on demand |  |                                     | 300   |  |      |  |    | (1)  |  |  |    |  |  |  |   | 
|The Sequoia Funds                      |  | Non-trading in nature, unsecured, interest-free advances and repayable on demand |  |                                     | 2,250 |  |      |  |    |      |  |  |    |  |  |  |   | 
|Xplane Ltd.                            |  | Non-trading in nature, unsecured, interest-free advances and repayable on demand |  |                                     |      |  |      |  |    |      |  |  | 126 |  |  |  | 20 | 
|Shenzhen Feidong Technologies Co., Ltd |  | Non-trading in nature, unsecured, interest-free advances and repayable on demand |  |                                     | 81    |  |      |  |    |      |  |  |    |  |  |  |   | 
|Amounts Due to Related Parties         |  |                                                                                  |  |                                     |       |  |      |  |     |      |  |  |     |  |  |  |    | 
|Zhang Xing                             |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | 300   |  |      |  | 239 |      |  |  | 274 |  |  |  | 44 | 
|Sibi                                   |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | 420   |  |      |  | 656 |      |  |  | 597 |  |  |  | 95 | 
|The Sequoia Funds                      |  | Trading in nature, unsecured, non-interest bearing and repayable on demand       |  |                                     | 5,417 |  |      |  |    |      |  |  |    |  |  |  |   | 



|(1) | Mr. Song repaid the outstanding amount in September 2010.
|--- | ---------------------------------------------------------



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##### Table of Contents

The amounts due from the Sequoia Funds represent a capital injection made by Fanyi on
behalf of the Sequoia Funds for their 15% equity interest in Hangzhou Guanzhun Technologies Co., Ltd., or Guanzhun, one of our associates. The amounts due to the Sequoia Funds represent the approved distribution payable to the Sequoia Funds which
has been recorded as finance cost.

Beijing Speedpay Technology Co., Ltd., over which our director, Mr. Kui Zhou, has
significant influence, provides payment processing service to us. In the three fiscal years ended March 31, 2010, 2011 and 2012, we paid a total of RMB173,900, RMB510,400 and RMB1,373,200 (US$218,055), respectively, to Beijing Speedpay
Technology Co., Ltd.

Share Incentive Plan

See Item 6. Directors, Senior Management and Employees  B. Compensation of Directors and Executive Officers  Share Incentive Plan.



|C. | Interests of Experts and Counsel
|-- | --------------------------------

Not applicable.



|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------

We have appended consolidated financial statements as part of this annual report.

Legal
Proceedings

Mr. Carl Yeung, our chief financial officer, served as an independent director and the chairman of the
audit committee of China Natural Gas, Inc., or CHNG, a Delaware corporation whose shares of common stock were listed on the NASDAQ Global Market from 2008 to November 2010. CHNG and certain of its officers and directors, including Mr. Yeung,
have been named as defendants in a putative class action lawsuit alleging violations of the federal securities laws. The action, captioned Vandevelde v. China Natural Gas, Inc., et al.,No. 10-cv-00728, was filed in the United States
District Court for the District of Delaware on August 26, 2010. On August 12, 2011, the Court entered an order appointing Robert Skeway, an individual investor, as lead plaintiff and approving his selection of lead counsel. Lead plaintiff
and Raimundo Jo-Fung, another individual investor, who together seek to represent a class of all persons who purchased CHNG common stock between March 10, 2010 and September 21, 2011, filed an amended complaint on October 11, 2011.
Plaintiffs assert claims for violations of Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The amended complaint alleges the defendants made false or misleading statements in CHNGs Annual Reports on Form
10-K for the years ended December 31, 2009, and December 31, 2010, and in various quarterly reports, by purportedly failing to disclose a series of loans and related party transactions. The amended complaint also asserts claims against
certain of CHNGs current and former officers and directors for violations of Section 20(a) of the Securities Exchange Act of 1934, including Mr. Yeung. The suit seeks unspecified monetary damages. Mr. Yeung could potentially be
held individually liable for civil damages in these actions.

On December 12, 2011 CHNG filed a motion to dismiss and
the motion is now fully briefed. Mr. Yeung has not been served with a copy of the summons and complaint.

Other than the
foregoing, we are not a party to any material litigation or other legal proceeding and are not aware of any pending or threatened litigation or other legal proceeding that may materially adversely affect our business or operations.

Dividend Policy

We are
a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends to our shareholders. Current PRC regulations permit our PRC subsidiaries to
pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside a certain amount of its after-tax
profits each year, if any, to fund certain statutory reserves. These reserves are not distributable as cash dividends. Furthermore, if our subsidiaries in China incur debt on their own behalf in the future, the instruments governing the debt may
restrict their ability to pay dividends or make other payments to us.



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In March 2010, we declared and paid dividends in the amount of RMB16.3 million to our
common shareholders, and we also approved a distribution payable to our preferred shareholders who have participating rights in the amount of RMB5.4 million, which has been recorded as finance cost. In May 2010, we declared and paid dividends in the
amount of RMB13.0 million to our common shareholders, and we also approved a distribution payable to our preferred shareholders who have participating rights in the amount of RMB4.3 million. However, we do not plan to declare and pay any dividends
on our shares or ADSs in the near future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

Our board of directors has complete discretion as to whether to distribute dividends, subject to the approval of our shareholders. Even if our board of directors decides to pay dividends, the form,
frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any
dividends, we will pay our ADS holders to the same extent as holders of our common shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our common shares, if any, will be paid
in U.S. dollars.



|B. | Significant Changes
|-- | -------------------

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited
consolidated financial statements included in this annual report.



|ITEM 9. | THE OFFER AND LISTING
|------- | ---------------------



|A. | Offer and Listing Details
|-- | -------------------------

Our ADSs, each representing eight common shares, have been listed on the NASDAQ Global Market since December 10, 2010. Our ADSs are
traded under the symbol MOBI.

The following table provides the high and low trading prices for our ADSs on the
NASDAQ Global Market for the periods shown.



|                                                               |  |             |       |  |     |  |      | 
|-------------------------------------------------------------- |  | ----------- | ----- |  | --- |  | ---- | 
|                                                               |  | Sales Price |      
|                                                               |  | High        |       |  | Low | 
|Annual Highs and Lows                                          |  |             |       |  |     |  |      | 
|Fiscal Year ended March 31, 2011 (from December 10, 2010)      |  |             | 13.14 |  |     |  | 4.98 | 
|Fiscal Year ended March 31, 2012                               |  |             | 23.25 |  |     |  | 2.75 | 
|                                                               |  |            
|Quarterly Highs and Lows                                       |  |             |       |  |     |  |      | 
|Third Quarter ended December 31, 2010 (from December 10, 2010) |  |             | 7.00  |  |     |  | 5.14 | 
|Fourth Quarter ended March 31, 2011                            |  |             | 13.14 |  |     |  | 4.98 | 
|First Quarter ended June 30, 2011                              |  |             | 23.25 |  |     |  | 5.12 | 
|Second Quarter ended September 30, 2011                        |  |             | 11.87 |  |     |  | 2.96 | 
|Third Quarter ended December 31, 2011                          |  |             | 6.13  |  |     |  | 2.75 | 
|Fourth Quarter ended March 31, 2012                            |  |             | 5.55  |  |     |  | 3.36 | 
|                                                               |  |            
|Monthly Highs and Lows                                         |  |             |       |  |     |  |      | 
|February 2012                                                  |  |             | 5.55  |  |     |  | 3.72 | 
|March 2012                                                     |  |             | 4.95  |  |     |  | 3.36 | 
|April 2012                                                     |  |             | 3.64  |  |     |  | 2.82 | 
|May 2012                                                       |  |             | 3.49  |  |     |  | 2.00 | 
|June 2012 (through June 28, 2012)                              |  |             | 2.53  |  |     |  | 1.85 | 



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|B. | Plan of Distribution
|-- | --------------------

Not applicable.



|C. | Markets
|-- | -------

Our ADSs, each
representing eight common shares, have been listed on the NASDAQ Global Market since December 10, 2010. Our ADSs are traded under the symbol MOBI.



|D. | Selling Shareholders
|-- | --------------------

Not applicable.



|E. | Dilution
|-- | --------

Not
applicable.



|F. | Expenses of the Issue
|-- | ---------------------

Not applicable.



|ITEM 10. | ADDITIONAL INFORMATION
|-------- | ----------------------



|A. | Share Capital
|-- | -------------

Not
applicable.



|B. | Memorandum and Articles of Association
|-- | --------------------------------------

We are a Cayman Islands company and our affairs are governed by our memorandum and articles of association and the Companies Law of the Cayman Islands, which is referred to as the Companies Law below.

All share and per share data have been adjusted to reflect a 100-for-1 share split that became effective on August 2,
2007 and a further 200-for-1 share split that became effective on November 18, 2010. As of the date of this annual report, our authorized share capital is US$1,000,000 consisting of 20,000,000,000 shares with par value of US$0.00005 each. The
following are summaries of material provisions of our currently effective amended and restated memorandum and articles of association and the Companies Law insofar as they relate to the material terms of our common shares. This summary is not
complete, and you should read our currently effective amended and restated memorandum and articles of association.

Registered Office

The registered office of our company is at the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins
Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands or at such other place as the Directors may from time to time decide.

Board of
Directors

See Item 6.C. Board Practices  Board of Directors.

Common Shares

General. All of our outstanding common shares
are fully paid and non-assessable. Certificates representing the common shares are issued in registered form. Our shareholders who are nonresidents of the Cayman Islands may freely hold and vote their shares.



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Dividends. The holders of our common shares are entitled to such dividends as
may be declared by our board of directors subject to the Companies Law and to the amended and restated articles of association.

Voting Rights. Each common share is entitled to one vote on all matters upon which the common shares are entitled to vote. Voting at any shareholders meeting is by show of hands unless
a poll is demanded. A poll may be demanded by our chairman or any shareholder, present in person or by proxy.

A quorum
required for a meeting of shareholders consists of at least two shareholders present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative, who hold not less than one-third of our voting share
capital. An annual general meeting shall be held in each year other than the year in which the amended and restated articles of association was adopted. Extraordinary general meetings may be held at such times as may be determined by our board of
directors and may be convened by a majority of our board of directors or the chairman of the board on its/his own initiative. Also, any one or more shareholders holding not less than 25% of our voting share capital may require an extraordinary
general meeting to be called by the board of directors by written requisition to our board of directors or secretary. Advance notice of at least 10 clear days is required for the convening of our annual general meeting and other shareholders
meetings.

An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the
votes attaching to the common shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the common shares. A special resolution is required for important
matters such as amendments to the memorandum and articles of association, a change of name or voluntary liquidation. Holders of the common shares may effect certain changes by ordinary resolution, including alter the amount of our authorized share
capital, consolidate and divide all or any of our share capital into shares of larger amount than our existing share capital, and cancel any unissued shares.

Transfer of Shares. Subject to the restrictions of our amended and restated memorandum and articles of association, as applicable, any of our shareholders may transfer all or any of his or
her common shares by an instrument of transfer in the usual or common form or any other form approved by our board.

Our
board of directors may, in its sole discretion, decline to register any transfer of any common share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any common share unless
(a) the instrument of transfer is lodged with us, accompanied by the certificate for the common shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the
transfer; (b) the instrument of transfer is in respect of only one class of common shares; (c) the instrument of transfer is properly stamped, if required; (d) in the case of a transfer to joint holders, the number of joint holders to
whom the common share is to be transferred does not exceed four; (e) the shares concerned are free of any lien in favor of us; or (f) a fee of such maximum sum as the NASDAQ Global Market may determine to be payable, or such lesser sum as
our board of directors may from time to time require, is paid to us in respect thereof.

If our directors refuse to register
a transfer they shall, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on notice being given by
advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of
transfers shall not be suspended nor the register closed for more than 30 days in any year.

Liquidation. On a
return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution among the holders of common shares shall be distributed among the holders of the common shares on a pro rata
basis.

Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon
shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 clear days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid on the specified time are
subject to forfeiture.



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Redemption of Shares. Subject to the provisions of the Companies Law, we may
issue shares on terms that are subject to redemption, at our option or at the option of the holders, on such terms and in such manner, including out of capital, as may, before the issue of such shares, be determined by our board of directors.

Variations of Rights of Shares. All or any of the special rights attached to any class of shares may, subject
to the provisions of the Companies Law, be varied with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Inspection of Books and Records. Holders of our common shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate
records. However, we will provide our shareholders with annual audited financial statements. See Where You Can Find Additional Information.

Changes in Capital. We may from time to time by ordinary resolutions:



| |  |  | increase the share capital by such sum, to be divided into shares of such classes and amount, as the resolution shall prescribe;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | sub-divide our existing shares, or any of them into shares of a smaller amount; and
| | - |  | -----------------------------------------------------------------------------------



| |  |  | cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish the amount
of our share capital by the amount of the shares so cancelled.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Subject to the Companies Law and our
amended and restated memorandum and articles of association with respect to matters to be dealt with by ordinary resolution, we may, by special resolution, reduce our share capital and any capital redemption reserve in any manner authorized by law.

Issuance of Additional Shares. Our amended and restated memorandum and articles of association authorizes our
board of directors to issue additional common shares from time to time as our board of directors shall determine, to the extent there are available authorized but unissued shares.

Our amended and restated memorandum and articles of association authorizes our board of directors to establish from time to time one or
more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series, including:



| |  |  | designation of the series;
| | - |  | --------------------------



| |  |  | the number of shares of the series;
| | - |  | -----------------------------------



| |  |  | the dividend rights, conversion rights and voting rights; and
| | - |  | -------------------------------------------------------------



| |  |  | the rights and terms of redemption and liquidation preferences.
| | - |  | ---------------------------------------------------------------

The issuance of preferred shares may be used as an anti-takeover device without further action on the part of the shareholders. Issuance
of these shares may dilute the voting power of holders of common shares.

Differences in Corporate Law

The Companies Law is modeled after that of England and Wales but does not follow recent statutory enactments in England. In addition, the
Companies Law differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Companies Law applicable to us and the laws applicable to
companies incorporated in the State of Delaware.



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Mergers and Similar Arrangements. A merger of two or more constituent
companies under Cayman Islands law requires a plan of merger or consolidation to be approved by the directors of each constituent company and authorization by (a) a special resolution and (b) such other authorization, if any, as may be
specified in its articles of association.

A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries
does not require authorization by a resolution of shareholders. For this purpose a subsidiary is a company of which at least ninety percent (90%) of the issued shares entitled to vote are owned by the parent company.

The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is
waived by a court in the Cayman Islands.

Except in certain circumstances, a shareholder of a Cayman constituent company is
entitled to payment of the fair value of his shares upon dissenting to a merger or consolidation. The exercise of appraisal rights will preclude the exercise of any other rights save for the right to seek relief on the grounds that the merger or
consolidation is void or unlawful.

In addition, there are statutory provisions that facilitate the reconstruction and
amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors representing 75% in value of each such class of shareholders or creditors, as the case may be, that are present
and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder
has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:



| |  |  | the statutory provisions as to the required majority vote have been met;
| | - |  | ------------------------------------------------------------------------



| |  |  | the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the
minority to promote interests adverse to those of the class;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.
| | - |  | ------------------------------------------------------------------------------------------------------------------

When a take-over offer is made and accepted by holders of 90.0% of the shares within four months, the offeror may, within a two-month
period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to
succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.

If an
arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to
receive payment in cash for the judicially determined value of the shares.

Shareholders Suits. In
principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman
Islands, there are exceptions to the foregoing principle, including when:



| |  |  | a company acts or proposes to act illegally or ultra vires;
| | - |  | -----------------------------------------------------------



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| |  |  | the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been
obtained; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | those who control the company are perpetrating a fraud on the minority.
| | - |  | -------------------------------------------------------------------------

Indemnification of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the
extent to which a companys memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such
as to provide indemnification against civil fraud or the consequences of committing a crime.

Our amended and restated
memorandum and articles of association permit indemnification of officers and directors for losses, damages costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud which may attach to such
directors or officers. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. In addition, we intend to enter into indemnification agreements with our directors and senior
executive officers that will provide such persons with additional indemnification beyond that provided in our amended and restated memorandum and articles of association.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed
that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Directors Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two
components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform
himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he or she reasonably believes to be in the best interests of
the corporation. He or she must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any
interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the
action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must
prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

As a matter
of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes the following duties to the company  a duty to act bona fide in the best
interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him to do so) and a duty not to put himself in a position where the interests of the company conflict with his or her personal
interest or his or her duty to a third party. A director of a Cayman Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a
greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these
authorities are likely to be followed in the Cayman Islands.

Shareholder Action by Written Consent. Under the
Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Similarly, our amended and restated articles of association provide that any action
required or permitted to be taken at any annual or extraordinary general meetings of the company may be taken only upon the vote of the members at an annual or extraordinary general meeting duly noticed and convened in accordance with our amended
and restated articles of association and the law and may not be taken by a written resolution of members without a meeting.



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Shareholder Proposals. Under the Delaware General Corporation Law, a
shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person
authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

Our amended
and restated articles of association allow any shareholder holding 25% or more of our paid up capital carrying the right of voting at general meetings to requisition a shareholders meeting. As an exempted Cayman Islands company, we are not
obliged by law to call shareholders annual general meetings. However, our amended and restated articles of association require us to call such meetings.

Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporations certificate of incorporation
specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a
single director, which increases the shareholders voting power with respect to electing such director. As permitted under Cayman Islands law, our amended and restated articles of association do not provide for cumulative voting. As a result,
our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.

Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may
be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our amended and restated articles of association, directors may be removed by
ordinary resolution at any time before the expiration of their period of office.

Transactions with Interested
Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its
certificate of incorporation, it is prohibited from engaging in certain business combinations with an interested shareholder for three years following the date that such person becomes an interested shareholder. An interested shareholder
generally is a person or a group who or which owns or owned 15% or more of the targets outstanding voting stock within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the
target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business
combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the targets board of
directors.

Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections
afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, such transactions must be entered into bona fide in the best interests of
the company for a proper corporate purpose and not with the effect of constituting a fraud on the minority shareholders.

Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal
to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporations
outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board. Under Cayman Islands law, a company may be wound
up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up
in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.



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Under the Companies Law of the Cayman Islands and our amended and restated articles of
association, our company may be dissolved, liquidated or wound up by a special resolution.

Variation of Rights of
Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise.
Under Cayman Islands law and our amended and restated articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class only with a special resolution passed at a general
meeting of the holders of the shares of that class.

Amendment of Governing Documents. Under the Delaware
General Corporation Law, a corporations governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cayman Islands
law, our amended and restated memorandum and articles of association may only be amended by special resolution.

Inspection of Books and Records. Under the Delaware General Corporation Law, any shareholder of a corporation may for any
proper purpose inspect or make copies of the corporations stock ledger, list of shareholders and other books and records.

Holders of our shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we intend to provide our shareholders
with annual reports containing audited financial statements.

Anti-takeover Provisions in Our Memorandum and Articles
of Association. Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including a
provision that authorizes our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our
shareholders.

Such shares could be issued quickly with terms calculated to delay or prevent a change in control of our
company or make removal of management more difficult. If our board of directors decides to issue these preference shares, the price of our ADSs may fall and the voting and other rights of the holders of our common shares and ADSs may be materially
adversely affected.

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them
under our amended and restated memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.

Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our amended and restated memorandum and articles of association on the rights of non-resident or foreign
shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be
disclosed.



|C. | Material Contracts
|-- | ------------------

We
have not entered into any material contracts other than in the ordinary course of business and other than those described in Item 4. Information on the Company or elsewhere in this annual report on Form 20-F.



|D. | Exchange Controls
|-- | -----------------

See
Item 4. Information on the Company  B. Business Overview  Regulations  Dividend Distribution and  Foreign Currency Exchange.



|E. | Taxation
|-- | --------

The following
summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs or common shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which
are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or common shares, such as the tax consequences under state, local and other tax laws not addressed herein.



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Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty or
withholding tax applicable to us or to any holder of our ADSs and common shares. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments
executed in, or after execution brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies, except those which hold interests in land in the Cayman
Islands. The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Pursuant to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, we have obtained an undertaking from the Governor-in-Council:

(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall
apply to us or our operations; and

(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax
shall not be payable on or in respect of our shares, debentures or other obligations or by way of the withholding in whole or in part of any relevant payment as defined in Section 6(3) of the Tax Concessions Law (1999 Revision) of the Cayman
Islands.

The undertaking for us is for a period of twenty years from August 10, 2010.

Peoples Republic of China Taxation

If the PRC tax authorities determine that our Cayman Islands holding company is a resident enterprise for PRC enterprise income tax purposes, a withholding tax of 10% for our non-PRC
enterprise shareholders or potentially 20% for non-PRC individual shareholders may be imposed on dividends they receive from us and on gains they recognize from transferring our shares or ADSs. See Item 3. Key Information  D. Risk
Factors  Risks Related to Doing Business in China  We may be classified as a resident enterprise for PRC enterprise income tax purposes, which could result in our global income becoming subject to 25% PRC enterprise income
tax.

United States Federal Income Taxation

The following discussion describes certain U.S. federal income tax consequences to U.S. Holders (as defined below) under present law of an investment in our ADSs or common shares. This discussion applies
only to U.S. Holders that hold the ADSs or common shares as capital assets (generally, property held for investment) and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as of the
date of this annual report and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this annual report, as well as judicial and administrative interpretations thereof available on or before such date. All of the
foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The following discussion neither deals with the tax consequences to any particular investor nor describes all of the tax consequences applicable to persons in special tax situations such as:



| |  |  | banks;
| | - |  | ------



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| |  |  | certain financial institutions;
| | - |  | -------------------------------



| |  |  | insurance companies;
| | - |  | --------------------



| |  |  | regulated investment companies;
| | - |  | -------------------------------



| |  |  | real estate investment trusts;
| | - |  | ------------------------------



| |  |  | broker-dealers;
| | - |  | ---------------



| |  |  | traders that elect to mark to market;
| | - |  | -------------------------------------



| |  |  | U.S.expatriates;
| | - |  | ----------------



| |  |  | tax-exempt entities;
| | - |  | --------------------



| |  |  | persons liable for alternative minimum tax;
| | - |  | -------------------------------------------



| |  |  | persons holding ADSs or common shares as part of a straddle, hedging, conversion or integrated transaction;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | persons who acquired ADSs or common shares pursuant to the exercise of any employee share option or otherwise as compensation; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | partnerships or pass-through entities, or persons holding ADSs or common shares through such entities.
| | - |  | ------------------------------------------------------------------------------------------------------

INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR
CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR COMMON SHARES.

The discussion below of the U.S. federal income tax consequences to U.S. Holders will apply to you if you are the beneficial owner of our ADSs or common shares and you are, for U.S. federal
income tax purposes,



| |  |  | an individual who is a citizen or resident of the United States;
| | - |  | ----------------------------------------------------------------



| |  |  | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the
laws of the United States, any State thereof or the District of Columbia;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all
substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If you are a partner in a partnership or other entity taxable as a partnership that holds common shares, your tax treatment will depend on your status and the activities of the partnership. If you are a
partner in such a partnership, you should consult your tax advisor.



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The discussion below assumes that the representations contained in the deposit agreement
are true and the obligations in the deposit agreement and any related agreement have been and will be complied with in accordance with their terms. If you own ADSs, you should be treated as the owner of the underlying common shares represented by
those ADSs for U.S. federal income tax purposes.

The U.S. Treasury has expressed concerns that intermediaries in the chain
of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying security (for example, pre-releasing ADSs to persons that do not
have the beneficial ownership of the securities underlying the ADSs). Accordingly, the creditability of any PRC taxes and the availability of the reduced tax rate for any dividends received by certain non-corporate U.S. Holders, including individual
U.S. Holders (as discussed below), could be affected by actions taken by intermediaries in the chain of ownership between the holders of ADSs and our company if as a result of such actions the holders of ADSs are not properly treated as beneficial
owners of underlying common shares.

Passive Foreign Investment Company

Based on the market price of our ADSs, the value of our assets and the composition of our income and assets, we believe we were a PFIC
for U.S. federal income tax purposes for our taxable year ended March 31, 2012. A non-U.S. corporation will be a PFIC for U.S. federal income tax purposes for any taxable year if either:



| |  |  | at least 75% of its gross income for such year is passive income; or
| | - |  | --------------------------------------------------------------------



| |  |  | at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that
produce passive income or are held for the production of passive income.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For this purpose, we will be
treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock. In applying this rule, while it is not
clear, we believe the contractual arrangements between us and our affiliated entities should be treated as ownership of stock.

A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value
of our assets for purposes of the asset test will generally be determined by reference to the market price of our ADSs or equity shares, our PFIC status will depend in large part on the market price of the ADSs or common shares, which may fluctuate
significantly.

If we are a PFIC for any taxable year during which you hold ADSs or common shares, we generally will continue
to be treated as a PFIC with respect to you for all succeeding years during which you hold ADSs or common shares, unless we cease to be a PFIC and you make a deemed sale election with respect to the ADSs or common shares. If such
election is made, you will be deemed to have sold ADSs or common shares you hold at their fair market value on the last day of the last taxable year in which we qualified as a PFIC and any gain from such deemed sale would be subject to the
consequences described in the following two paragraphs. After the deemed sale election, your ADSs or common shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.

For each taxable year that we are treated as a PFIC with respect to you, you will be subject to special tax rules with
respect to any excess distribution you receive and any gain you recognize from a sale or other disposition (including a pledge) of the ADSs or common shares, unless you make a mark-to-market election as discussed below.
Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or common shares will be treated as
an excess distribution. Under these special tax rules:



| |  |  | the excess distribution or recognized gain will be allocated ratably over your holding period for the ADSs or common shares;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



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| |  |  | the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we were a PFIC,
will be treated as ordinary income; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for
each such year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The tax liability for amounts allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and gains (but not losses)
realized on the sale or other disposition of our ADSs or common shares cannot be treated as capital, even if you hold the ADSs or common shares as capital assets.

If we are treated as a PFIC with respect to you for any taxable year, to the extent any of our subsidiaries are also PFICs or we make direct or indirect equity investments in other entities that are
PFICs, you may be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in that proportion which the value of the ADSs or common shares you own bears to the value of all of our ADSs or common shares, and you may
be subject to the adverse tax consequences described in the preceding two paragraphs with respect to the shares of such lower-tier PFICs that you would be deemed to own. You should consult your tax advisors regarding the application of the PFIC
rules to any of our subsidiaries.

A U.S. Holder of marketable stock (as defined below) in a PFIC may make a
mark-to-market election for such stock to elect out of the PFIC rules described above regarding excess distributions and recognized gains. If you make a mark-to-market election for our ADSs or common shares, you will include in income for each year
we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs or common shares as of the close of your taxable year over your adjusted basis in such ADSs or common shares. You will be allowed an ordinary deduction for the
excess, if any, of the adjusted basis of the ADSs or common shares over their fair market value as of the close of the taxable year. However, deductions will be allowable only to the extent of any net mark-to-market gains on the ADSs or common
shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs or common shares, will be treated as ordinary income.
Ordinary loss treatment will also apply to the deductible portion of any mark-to-market loss on the ADSs or common shares, as well as to any loss realized on the actual sale or other disposition of the ADSs or common shares, to the extent that the
amount of such loss does not exceed the net mark-to-market gains previously included for such ADSs or common shares. Your basis in the ADSs or common shares will be adjusted to reflect any such income or loss amounts. If you make a mark-to-market
election, any distributions we make would generally be subject to the rules discussed above under  Taxation of Dividends and Other Distributions on the ADSs or Common Shares, except that the lower tax rate applicable to qualified
dividend income would not apply.

The mark-to-market election is available only for marketable stock, which is
stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. Our ADS are listed on the NASDAQ Global Market, which is a qualified exchange or other market for these purposes.
Consequently, if the ADSs continue to be listed on the NASDAQ Global Market and are regularly traded, and you are a holder of ADSs, we expect the mark-to-market election would be available to you if we were to become a PFIC. Because a mark-to-market
election cannot be made for equity interests in any lower-tier PFICs that we own, a U.S. Holder may continue to be subject to the PFIC rules with respect to its indirect interest in any investments held by us that are treated as an equity interest
in a PFIC for U.S. federal income tax purposes. You should consult your tax advisors as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs.

Alternatively, if a non-U.S. corporation is a PFIC, a holder of shares in that corporation may avoid taxation under the PFIC rules
described above regarding excess distributions and recognized gains by making a qualified electing fund election to include in income its share of the corporations income on a current basis. However, you may make a qualified
electing fund election with respect to your ADSs or common shares only if we agree to furnish you annually with certain tax information, and we currently do not intend to prepare or provide such information.



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Unless otherwise provided by the U.S. Treasury, each U.S. Holder of a PFIC is required to
file an annual report containing such information as the U.S. Treasury may require. If we are or become a PFIC, you should consult your tax advisor regarding any reporting requirements that may apply to you.

You are strongly urged to consult your tax advisor regarding the application of the PFIC rules to your investment in ADSs or common
shares.

Taxation of Dividends and Other Distributions on the ADSs or Common Shares

Subject to the PFIC rules discussed below, the gross amount of any distributions we make to you with respect to our ADSs or common shares
generally will be includible in your gross income as dividend income on the date of receipt by the depositary, in the case of ADSs, or on the date of receipt by you, in the case of common shares, but only to the extent the distribution is paid out
of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Any such dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from
other U.S. corporations. To the extent the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a tax-free return of
your tax basis in your ADSs or common shares, and then, to the extent such excess amount exceeds your tax basis in your ADSs or common shares, as capital gain. We currently do not, and we do not intend to, calculate our earnings and profits under
U.S. federal income tax principles. Therefore, a U.S. Holder should expect any distribution will generally be reported as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the
rules described above.

With respect to certain non-corporate U.S. Holders, including individual U.S. Holders, for taxable
years beginning before January 1, 2013, any dividends may be taxed at the lower capital gains rate applicable to qualified dividend income, provided (1) either (a) the ADSs or common shares, as applicable, are readily
tradable on an established securities market in the United States or (b) we are eligible for the benefits of a qualifying income tax treaty with the United States that includes an exchange of information program, (2) we are neither a PFIC
nor treated as such with respect to you (as discussed below) for the taxable year in which the dividend was paid and the preceding taxable year and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority,
ADSs are considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the NASDAQ Global Market, as are our ADSs. However, based on existing guidance, it is not
entirely clear whether dividends you receive with respect to the common shares will be taxed as qualified dividend income, because the common shares are not themselves listed on a U.S. exchange. As discussed above in  Passive Foreign
Investment Company, we believe we were a PFIC for the taxable year ended March 31, 2012. If we are treated as a resident enterprise for PRC tax purposes under the PRC Corporate Income Tax Law, we may be eligible for the
benefits of the income tax treaty between the United States and the PRC. You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends paid with respect to
our ADSs or common shares.

Any dividends will constitute foreign source income for foreign tax credit limitation purposes.
If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will in general be limited to the gross amount of the dividend,
multiplied by the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific
classes of income. For this purpose, dividends distributed by us with respect to our ADSs or common shares will generally constitute passive category income but could, in the case of certain U.S. Holders, constitute general
category income.

If PRC withholding taxes apply to any dividends paid to you with respect to our ADSs or common
shares, the amount of the dividend would include the withheld PRC taxes and, subject to certain conditions and limitations, such PRC withholding taxes generally will be treated as foreign taxes eligible for credit against your U.S. federal income
tax liability. The rules relating to the determination of the foreign tax credit are complex and you should consult your tax advisors regarding the availability of a foreign tax credit in your particular circumstances, including the effects of any
applicable income tax treaties.



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Taxation of Disposition of ADSs or Common Shares

Subject to the PFIC rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of
ADSs or common shares equal to the difference between the amount realized for the ADSs or common shares and your tax basis in the ADSs or common shares. The gain or loss generally will be capital gain or loss. If you are a non-corporate U.S. Holder,
including an individual U.S. Holder, that has held the ADSs or common shares for more than one year, you may be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. As discussed above in  Passive
Foreign Investment Company, we believe we were a PFIC for the taxable year ended March 31, 2012. Any gain or loss you recognize on a disposition of ADSs or common shares will generally be treated as U.S. source income or loss for foreign
tax credit limitation purposes. However, if we are treated as a resident enterprise for PRC tax purposes, we may be eligible for the benefits of the income tax treaty between the United States and the PRC. In such event, if PRC tax were
to be imposed on any gain from the disposition of the ADSs or common shares, a U.S. Holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may elect to treat the gain as PRC source income for foreign
tax credit purposes. You should consult your tax advisors regarding the proper treatment of gain or loss in your particular circumstances, including the effects of any applicable income tax treaties.

Information Reporting and Backup Withholding

Any dividend payments with respect to ADSs or common shares and proceeds from the sale, exchange or redemption of ADSs or common shares may be subject to information reporting to the U.S. Internal Revenue
Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder that furnishes a correct taxpayer identification number and makes any other required certification or that is otherwise exempt from backup
withholding. U.S. Holders that are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisors regarding the application of the U.S.
information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup
withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue
Service and furnishing any required information in a timely manner.

Additional Reporting Requirements

Certain U.S. Holders who are individuals are required to report information relating to an interest in our ADSs or common shares, subject
to certain exceptions (including an exception for ADSs or common shares held in accounts maintained by certain financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of these rules on their ownership
and disposition of the ADSs and common shares.



|F. | Dividends and Paying Agents
|-- | ---------------------------

Not Applicable.



|G. | Statement by Experts
|-- | --------------------

Not Applicable.



|H. | Documents on Display
|-- | --------------------

We
previously filed with the SEC our registration statement on Form F-1, as amended, and related prospectus under the Securities Act of 1933, with respect to our common shares represented by the ADSs. We also filed with the SEC a related
registration statement on Form F-6 with respect to the ADSs.



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We are subject to periodic reporting and other informational requirements of the Exchange
Act as applicable to foreign private issuers. Accordingly, we are required to file reports, including annual reports on Form 20-F, and other information with the SEC. All documents filed by us with the SEC can be inspected and copied at the public
reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. The SEC also maintains a web site at www.sec.govthat contains reports, proxy and information statements, and other information regarding registrants that make electronic filings
with the SEC using its EDGAR system.

As a foreign private issuer, we are exempt from the rules of the Exchange Act
prescribing the furnishing and content of quarterly reports and proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

We intend to furnish Citibank, N.A., the depositary of our ADSs, with all notices of shareholders meeting and other
reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon our written request, will mail to all record holders of ADSs
the information contained in any notice of a shareholders meeting received by the depositary from us.

In accordance
with Rule 5250(d) of the NASDAQ Listing Rules, we will post this annual report on Form 20-F on our website at http://ir.sky-mobi.com/sec.cfm. In addition, we will provide hard copies of our annual report free of charge to shareholders and ADS
holders upon request.



|I. | Subsidiary Information
|-- | ----------------------

For a listing of our subsidiaries, see Item 4  Information on the Company  C. Organizational Structure, as well
as Exhibit 8.1 filed herewith.



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

Foreign Exchange Risk

Our revenues and purchases are generally
denominated in Renminbi. Our assets and liabilities are also denominated in Renminbi, except for cash held in other currencies, which amounted to RMB74.8 million and RMB89.5 million as of March 31, 2011 and March 31, 2012, respectively. As
a result, fluctuations in the exchange rates between the U.S. dollar and Renminbi will affect our results of operations and financial condition. The Renminbis exchange rate with the U.S. dollar is affected by, among other things, changes in
Chinas political and economic conditions and Chinas foreign exchange policies. The Peoples Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in RMB exchange rates and achieve policy goals.

On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar,
and the RMB appreciated more than 20% against the U.S. dollar over the following five years. In June 2010, the PRC government announced that it would increase Renminbi exchange rate flexibility and since that time the Renminbi has gradually
appreciated against the U.S. dollar. However, it remains unclear how this flexibility might be implemented. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, which could result in
greater fluctuation of the Renminbi against the U.S. dollar.

To the extent that we need to convert U.S. dollars into RMB for
our operations or other uses within the PRC, appreciation of the RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from the conversion. On the other hand, a decline in the value of RMB against the U.S.
dollar could reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in our company and the dividends we may pay in the future, if any, all of which may have a material adverse effect on the price of our
ADSs. As of March 31, 2012, we had RMB-denominated cash balances of RMB484.8 million. Assuming we had converted the RMB484.8 million into U.S. dollars at the exchange rate of $1.00 for RMB6.2975 as of March 30, 2012, this cash balance
would have been $77.0 million. Assuming a 5% depreciation of the RMB against the U.S. dollar, this cash balance would have decreased to US$73.3 million as of March 31, 2012 resulting in US$3.7 million of foreign exchange loss.



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Interest Rate Risk

We do not have any outstanding long-term or short-term loans. Our exposure to interest rate risk primarily relates to interest income generated by excess cash invested in bank deposits with original
maturities of three months or less and time deposits with maturity terms of three months or more but less than one year. If we borrow money in future periods, we may be exposed to interest rate risk related to interest expenses incurred by any
short-term or long-term bank borrowings. We have not used any derivative financial instruments to manage our interest risk exposure. We have not been exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates.
However, our future interest income may be lower than expected due to changes in market interest rates.

Inflation Risk

In recent years, inflation has not had a material impact on our results of operations. According to the National Bureau of Statistics of
China, the change in Chinas Consumer Price Index was -0.7%, 3.3% and 5.4% in calendar year 2009, 2010 and 2011, respectively. If inflation rises, it may materially adversely affect our business.

Credit Risk

Our
maximum exposure to credit risks is equivalent to the total carrying amount of loan receivable, trade and other receivables, amounts due from related parties, cash and cash equivalents, term deposits, investments at FVTPL and available-for-sale
investments in the aggregate amount of RMB242.0 million, RMB604.1 million and RMB673.9 million (US$107.0 million) as of March 31, 2010, 2011 and 2012, respectively.

Collection of our revenues is substantially done through mobile service providers with whom we have co-operative service agreements. The total carrying amount of trade receivables from mobile service
providers was RMB71.8 million, RMB81.4 million and RMB81.7 million (US$13.0 million), respectively as of March 31, 2010, 2011 and 2012. We also had RMB7.2 million trade receivables from one mobile service operator as of March 31, 2012. In
order to minimize credit risk, we assess the credit worthiness of the mobile service providers prior to contracting with them.

In addition, we allocate revenue payments among mobile service providers based on their payment history and our assessment of their
relationship with the mobile network operators, which will impact the mobile service providers ability to pay. We monitor the subsequent performance of the mobile service providers in order to mitigate collection risk going forward. In
addition, we review the recoverable amount of each individual trade receivable at the end of each reporting period to determine if a provision should be made for uncollectible amounts.

We have concentration of credit risk with exposure limited to certain mobile service providers and one mobile network operator. As of
March 31, 2010, 2011 and 2012, our ten mobile service providers and the mobile network operator accounted for approximately RMB61.8 million, RMB53.3 million and RMB64.8 million (US$10.3 million), or 86%, 65% and 73%, of our trade receivables,
respectively. We closely monitor the subsequent settlement of trade receivables and do not grant long credit periods to the counterparties.

As of March 31, 2010, 2011 and 2012, all of our cash and cash equivalents and time deposits were held by reputable financial institutions. We believe that we are not exposed to unusual risks as these
financial institutions have high credit quality. We have not experienced any losses on deposits of cash and cash equivalents and short-term investments. Prior to entering into contracts, we make a credit assessment of our counterparties to assess
the collectability of the contracts.



|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------



|A. | Debt Securities
|-- | ---------------

Not
applicable.



|B. | Warrants and Rights
|-- | -------------------

Not
applicable.



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|C. | Other Securities
|-- | ----------------

Not
applicable.



|D. | American Depositary Shares
|-- | --------------------------

Fees and
Charges Our ADS holders May Have to Pay

ADS holders will be required to pay the following service fees to the depository:



|        |  |                                                                                                   |  |                                                                                          
|------- |  | ------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------
|Service |  | Fee                                                                                              
|       |  | Issuance of ADSs                                                                                  |  | Up to US$0.05 per ADS issued                                                             
|        |  |                                                                                                  
|       |  | Cancellation of ADSs                                                                              |  | Up to US$0.05 per ADS canceled                                                           
|        |  |                                                                                                  
|       |  | Distribution of cash dividends or other cash distributions                                        |  | Up to US$0.05 per ADS held                                                               
|       |  | Distribution of ADSs pursuant to stock dividends, free stock distributions or exercise of rights. |  | Up to US$0.05 per ADS held                                                               
|       |  | Distribution of securities other than ADSs or rights to purchase additional ADSs                  |  | Up to US$0.05 per ADS held                                                               
|       |  | Depositary services                                                                               |  | Up to US$0.05 per ADS held on the applicable record date(s) established by the depositary
|        |  |                                                                                                  
|       |  | Transfer of ADSs                                                                                  |  | US$1.50 per certificate presented for transfer                                           

ADS holders will also be responsible to pay certain fees and expenses incurred by the depositary and
certain taxes and governmental charges such as:



| |  |  | fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands
(i.e., upon deposit and withdrawal of ordinary shares);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expenses incurred for converting foreign currency into U.S. dollars;
| | - |  | --------------------------------------------------------------------



| |  |  | expenses for cable, telex and fax transmissions and for delivery of securities;
| | - |  | -------------------------------------------------------------------------------



| |  |  | taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit); and
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.
| | - |  | ------------------------------------------------------------------------------------------------------

Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by the brokers (on behalf of
their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these fees to their clients. Depositary fees
payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date.

The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions
other than cash (such as stock dividends and rights distributions), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether
certificated or uncertificated in direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary generally collects its fees
through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients ADSs in DTC accounts in
turn charge their clients accounts the amount of the fees paid to the depositary.



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In the event of refusal to pay the depositary fees, the depositary may, under the terms of
the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.

The fees and charges that ADS holders may be required to pay may vary over time and may be changed by us and by the depositary.

The depositary may reimburse us for certain expenses incurred by us in respect of the ADR program established pursuant to
the deposit agreement, by making available a portion of the depositary fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary may agree from time to time. As described in the deposit
agreement, we or the depositary may withhold or deduct from any distributions made in respect of ordinary shares and may sell for the account of a holder any or all of the ordinary shares and apply such distributions and sale proceeds in payment of
any taxes (including applicable interest and penalties) or charges that are or may be payable by holders in respect of the ADSs.

Fees and
Other Payments Made by the Depositary to Us

Our depositary has agreed to reimburse us for certain expenses we incur that
are related to establishment and maintenance of the ADS program, including investor relations expenses and exchange application and listing fees. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount
of reimbursement available to us is not related to the amounts of fees the depositary collects from investors.

PART II



|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- | -----------------------------------------------

Not Applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OF PROCEEDS

A.  D. Material Modifications to the Rights of Security Holders

None.



|E. | Use of Proceeds
|-- | ---------------

Not
applicable.



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|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief
financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by
Rule 13a-15(b) under the Exchange Act.

Based upon that evaluation, our chief executive officer and chief financial
officer have concluded that, as of March 31, 2012, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act was
recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated
and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Managements Annual Report on Internal Control over Financial Reporting and Attestation Report of the Independent Registered Public Accounting Firm

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule
13a-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control over
financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Our management evaluated the effectiveness of our internal control over financial reporting, as required by Rule 13a-15(c) of the
Exchange Act, based on criteria established in the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, management concluded that our internal control over financial reporting was effective as of March 31,
2012 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our independent registered public accounting firm, Deloitte Touche Tohmatsu CPA Ltd., has audited the effectiveness of our internal control over financial reporting as of March 31, 2012, as stated in
its report, which appears on page F-3 of this annual report on Form 20-F.



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Changes in Internal Control over Financial Reporting

During the audit of our financial statements for the fiscal year ended March 31, 2011, we identified one material weakness and one
significant deficiency in our internal control over financial reporting. The material weakness was related to design deficiencies with respect to our internal control over computer systems that could affect the integrity of transaction data and
financial information. The significant deficiency identified was related to lack of established and documented financial accounting policies and procedures.

In order to remediate the material weakness related to design deficiencies with respect to our internal control over computer systems that could affect the integrity of transaction data and financial
information, we hired two new internal IT control managers in May 2010 and June 2011 to upgrade our computer systems and monitor the performance of our system. We believe that the key aspect of the design deficiencies identified with respect to our
internal control over computer systems that could affect the integrity of transaction data and financial information had been fully addressed as of March 31, 2012.

In order to remediate the significant deficiency related to lack of established and documented financial accounting policies and procedures, we engaged an independent internal control advisor and hired a
new internal control manager, who has extensive working experience in internal control, in May 2011 to develop the appropriate financial accounting policies and procedures and monitor the operating effectiveness of these updated policies. We believe
that this significant deficiency had been remediated as of March 31, 2012.



|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT
|--------- | --------------------------------

Mr. Wei Zhou qualifies as an audit committee financial expert as defined in Item 16A of Form 20-F. Mr. Zhou satisfies the independence requirements of Rule 5605 of NASDAQ Stock
Market, Marketplace Rules and Rule 10A-3 under the Exchange Act.



|ITEM 16B. | CODE OF ETHICS
|--------- | --------------

Our
board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees. We have filed our code of business conduct and ethics as an exhibit to Exhibit 99.1 of our registration statement on Form F-1
(file No. 333-170707) filed with the Securities and Exchange Commission on November 26, 2010 and posted a copy of our code of business conduct and ethics on our investor relations website at http://ir.sky-mobi.com/governance.cfm. We hereby
undertake to provide to any person without charge, upon a written request, a copy of our code of business conduct and ethics.



|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--------- | --------------------------------------

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Deloitte Touche Tohmatsu CPA Ltd., our principal external
auditors, for the periods indicated.



|                      |  |                |       |  |      |  |       |     |  |  |       | 
|--------------------- |  | -------------- | ----- |  | ---- |  | ----- | --- |  |  | ----- | 
|                      |  | 2011           |       |  | 2012 | 
|                      |  | RMB            |       |  | RMB  |  |       | US$ | 
|                      |  | (in thousands) |      
|Audit fees(1)         |  |                | 3,876 |  |      |  | 7,172 |     |  |  | 1,139 | 
|Audit-related fees(2) |  |                |      |  |      |  | 1,202 |     |  |  | 191   | 
|Tax fees(3)           |  |                | 106   |  |      |  | 212   |     |  |  | 34    | 



|(1) | Audit fees means the aggregate fees billed for professional services rendered in connection with the audit or review of our financial statements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Audit-related fees represents aggregate fees billed for professional services rendered in connection with the assurance and related services.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Tax fees represents the aggregated fees billed for professional services rendered in connection with tax compliance, tax advice and tax planning.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

The policy of our audit committee is to pre-approve all audit and non-audit services provided by Deloitte
Touche Tohmatsu CPA Ltd, including audit services, audit-related services, tax services and other services as described above, and the services provided by Ernst & Young related to the internal controls over financial reporting for the
fiscal year ended March 31, 2012, other than those for de minimus services which are approved by our audit committee prior to the completion of the audit. Prior to our initial public offering, all initial public offering related accountant fees
were approved by the Board.



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|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|--------- | ----------------------------------------------------------

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY
THE ISSUER AND AFFILIATED PURCHASERS.

Not Applicable.



|ITEM 16F. | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
|--------- | --------------------------------------------

Not Applicable.



|ITEM 16G. | CORPORATE GOVERNANCE
|--------- | --------------------

We
are incorporated in the Cayman Islands and our corporate governance practices are governed by applicable Cayman Islands law. In addition, because our ADSs are listed on the NASDAQ Global Market, we are subject to the corporate governance
requirements of NASDAQ. However, NASDAQ Marketplace Rule 5615(a)(3) permits foreign private issuers like us to follow home country practice with respect to certain corporate governance matters, and we may decide to follow home
country practice on a case-by-case basis. In particular, we have elected to follow home country practice with respect to the composition of our audit committee. Under Cayman Islands law, our audit committee may comprise two
directors rather than three as required under NASDAQ Marketplace Rule 5605(c)(2). We are committed to a high standard of corporate governance. Accordingly, we endeavor to comply with most NASDAQ corporate governance practices and believe that we are
currently in compliance with the NASDAQ corporate governance practices applicable to foreign private issuers.

PART III



|ITEM 17. | FINANCIAL STATEMENTS
|-------- | --------------------

We
have elected to provide financial statements pursuant to Item 18.



|ITEM 18. | FINANCIAL STATEMENTS
|-------- | --------------------

The consolidated financial statements for Sky-mobi Limited and its subsidiaries are included at the end of this annual report.



|ITEM 19. | EXHIBITS
|-------- | --------



|              |  |                                                                                                                                                                                                                                                                         
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Document                                                                                                                                                                                                                                                 
|              | 
|1.1           |  | Third Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated by reference to Exhibit 3.2 of our registration statement on Form F-1 (File
No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)    
|              | 
|2.1           |  | Registrants Specimen American Depositary Receipt (incorporated by reference to Exhibit 99.A of our registration statement on Form F-6 (File No. 333-170849) filed
with the Commission on November 26, 2010)                                                            
|              | 
|2.2           |  | Registrants Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 of our registration statement on Form F-1 (File No. 333-170707), as
amended, initially filed with the Commission on November 19, 2010)                                  
|              | 
|2.3           |  | Form of Deposit Agreement among the Registrant, the depositary and holder of the American Depositary Receipts (incorporated by reference to Exhibit 99.A of our registration
statement on Form F-6 (File No. 333-170849) filed with the Commission on November 26, 2010)



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|4.1  |  | Amendment No. 1 to Series A Preferred Share and Warrant Purchase Agreement and Amendment No. 2 to Shareholders Agreement, dated as of March 1, 2010, among Profit Star
Limited, Sequoia Capital China II, L.P., Sequoia Capital China Principals Fund II, L.P., Sequoia Capital China Partners Fund II, L.P., Xplane Ltd., shareholders of Xplane Ltd. and certain other parties listed thereunder (incorporated by
reference to Exhibit 4.5 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)
|     | 
|4.2  |  | Shareholders Agreement, dated as of August 2, 2007, among Profit Star Limited, Sequoia Capital China II, L.P., Xplane Ltd., shareholders of Xplane Ltd. and certain other
parties listed thereunder (incorporated by reference to Exhibit 4.6 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                               
|     | 
|4.3  |  | Amendment to Shareholders Agreement, dated as of September 5, 2008, among Profit Star Limited, Sequoia Capital China II, L.P., Sequoia Capital China Principals Fund II,
L.P., Sequoia Capital China Partners Fund II, L.P., Xplane Ltd., shareholders of Xplane Ltd. and certain other parties listed thereunder (incorporated by reference to Exhibit 4.7 of our registration statement on Form F-1 (File No.
333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                 
|     | 
|4.4  |  | Amended and Restated Warrant to Purchase Series A Preferred Shares, dated as of June 29, 2009, among Profit Star Limited, Sequoia Capital China II, L.P., Sequoia Capital
China Principals Fund II, L.P., Sequoia Capital China Partners Fund II, L.P., Xplane Ltd., shareholders of Xplane Ltd. and certain other parties listed thereunder (incorporated by reference to Exhibit 4.9 of our registration statement
on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                      
|     | 
|4.5  |  | Share Vesting Agreement, dated as of August 2, 2007, among Profit Star Limited, Xplane Ltd. and shareholders of Xplane Ltd. (incorporated by reference to Exhibit 4.10 of
our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                      
|     | 
|4.6  |  | Shareholders Non-competition and Non-solicitation Agreement, dated as of August 1, 2007, among Profit Star Limited and shareholders of Xplane Ltd. (incorporated by reference to
Exhibit 4.11 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                               
|     | 
|4.7  |  | Confidential Information Agreement, dated as of August 1, 2007, among Profit Star Limited and shareholders of Xplane Ltd. (incorporated by reference to Exhibit 4.12 of our
registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                        
|     | 
|4.8  |  | 2010 Share Incentive Plan (incorporated by reference to Exhibit 10.1 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the
Commission on November 19, 2010)                                                                                                                                                                                                                                                                                                                                                                        
|     | 
|4.9  |  | Form of Indemnification Agreement with the Registrants directors and/or officers (incorporated by reference to Exhibit 10.2 of our registration statement on Form F-1
(File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                                                                
|     | 
|4.10 |  | English translation of Form of Employment Agreement with the Registrants certain senior executives and its amendment (incorporated by reference to Exhibit 10.3 of our
registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                            
|     | 
|4.11 |  | English translation of Form of Confidentiality Agreement with the Registrants certain senior executives (incorporated by reference to Exhibit 10.4 of our registration
statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 26, 2010)                                                                                                                                                                                                                                                                                         
|     | 
|4.12 |  | English translation of Form of Employment Agreement with the Registrants certain senior executives and its amendment (incorporated by reference to Exhibit 10.5 of our
registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                                                                                            
|     | 
|4.13 |  | English translation of Exclusive Business Cooperation Agreement, dated as of December 24, 2009, between Hangzhou Dianneng Technologies Co., Ltd. and Hangzhou Fanyi Technologies
Co., Ltd. (incorporated by reference to Exhibit 10.6 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                       
|     | 
|4.14 |  | English translation of Exclusive Purchase Option Agreement, dated as of February 1, 2010, among Hangzhou Dianneng Technologies Co., Ltd., Tao Song, Tao Yang, and Hangzhou Fanyi
Technologies Co., Ltd. (incorporated by reference to Exhibit 10.7 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                          



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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|4.15 |  | English translation of Equity Pledge Agreement, dated as of February 1, 2010, among Hangzhou Dianneng Technologies Co., Ltd., Tao Song, Tao Yang, and Hangzhou Fanyi
Technologies Co., Ltd. (incorporated by reference to Exhibit 10.8 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                       
|     | 
|4.16 |  | English translation of Form of Power of Attorney, issued by Tao Song and Tao Yang (incorporated by reference to Exhibit 10.9 of our registration statement on Form F-1 (File No.
333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                                                 
|     | 
|4.17 |  | English translation of Form of Loan Agreement, dated as of December 24, 2009, between Tao Song/Tao Yang and Hangzhou Dianneng Technologies Co., Ltd. (incorporated by reference
to Exhibit 10.10 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                             
|     | 
|4.18 |  | English translation of Form of Loan Agreement, dated as of February 1, 2010, between Tao Song/Tao Yang and Hangzhou Dianneng Technologies Co., Ltd. (incorporated by reference
to Exhibit 10.11 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                              
|     | 
|4.19 |  | English translation of Confirmation Letter regarding the Repayment Method under Loan Agreement, dated February 1, 2010, between Hangzhou Dianneng Technologies Co., Ltd. and Tao
Yang (incorporated by reference to Exhibit 10.12 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                            
|     | 
|4.20 |  | English translation of Framework Agreement on Re-structuring, dated as of July 1, 2010, among Hangzhou Sky Network Technologies Co., Ltd., Pusida (Beijing) Technologies Co.,
Ltd., Hangzhou Dianneng Technologies Co., Ltd., Hangzhou Mijia Technologies Co., Ltd. and Qinyi Zhu (incorporated by reference to Exhibit 10.13 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with
the Commission on November 19, 2010)
|     | 
|4.21 |  | English translation of Technical Support Service Agreement, dated as of July 1, 2010, between Hangzhou Sky Network Technologies Co., Ltd. and Hangzhou Dianneng Technologies
Co., Ltd. (incorporated by reference to Exhibit 10.14 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                           
|     | 
|4.22 |  | English translation of Strategy Consulting Service Agreement, dated as of July 1, 2010, between Hangzhou Sky Network Technologies Co., Ltd. and Hangzhou Dianneng Technologies
Co., Ltd. (incorporated by reference to Exhibit 10.15 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                         
|     | 
|4.23 |  | English translation of Intellectual Property License Agreement, dated as of July 1, 2010, between Hangzhou Sky Network Technologies Co., Ltd. and Hangzhou Dianneng Technologies
Co., Ltd. (incorporated by reference to Exhibit 10.16 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                       
|     | 
|4.24 |  | English translation of Purchase Option and Cooperation Agreement, dated as of July 1, 2010, among Hangzhou Sky Network Technologies Co., Ltd., Hangzhou Dianneng Technologies
Co., Ltd., Hangzhou Mijia Technologies Co., Ltd. and Qinyi Zhu (incorporated by reference to Exhibit 10.17 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19,
2010)                                     
|     | 
|4.25 |  | English translation of Form of Power of Attorney, issued by Hangzhou Mijia Technologies Co., Ltd. and Qinyi Zhu (incorporated by reference to Exhibit 10.18 of our registration
statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                                  
|     | 
|4.26 |  | English translation of Equity Pledge Agreement, dated as of July 1, 2010, among Hangzhou Mijia Technologies Co., Ltd., Qinyi Zhu, Hangzhou Dianneng Technologies Co., Ltd. and
Hangzhou Sky Network Technologies Co., Ltd. (incorporated by reference to Exhibit 10.19 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                       
|     | 
|4.27 |  | English translation of Framework Agreement on Re-structuring, dated as of July 1, 2010, among Hangzhou Mijia Technologies Co., Ltd., Pusida (Beijing) Technologies Co., Ltd.,
Hangzhou Dianneng Technologies Co., Ltd. and shareholders of Hangzhou Mijia Technologies Co., Ltd. (incorporated by reference to Exhibit 10.20 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the
Commission on November 19, 2010) 



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|4.28  |  | English translation of Technical Support Service Agreement, dated as of July 1, 2010, between Hangzhou Mijia Technologies Co., Ltd. and Hangzhou Dianneng Technologies Co., Ltd.
(incorporated by reference to Exhibit 10.21 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                     
|      | 
|4.29  |  | English translation of Strategy Consulting Service Agreement, dated as of July 1, 2010, between Hangzhou Mijia Technologies Co., Ltd. and Hangzhou Dianneng Technologies Co.,
Ltd. (incorporated by reference to Exhibit 10.22 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                   
|      | 
|4.30  |  | English translation of Intellectual Property License Agreement, dated as of July 1, 2010, between Hangzhou Mijia Technologies Co., Ltd. and Hangzhou Dianneng Technologies Co.,
Ltd. (incorporated by reference to Exhibit 10.23 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                 
|      | 
|4.31  |  | English translation of Purchase Option and Cooperation Agreement, dated as of July 1, 2010, among Hangzhou Mijia Technologies Co., Ltd., Hangzhou Dianneng Technologies Co.,
Ltd., and shareholders of Hangzhou Mijia Technologies Co., Ltd. (incorporated by reference to Exhibit 10.24 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19,
2010)                         
|      | 
|4.32  |  | English translation of Form of Power of Attorney, issued by shareholders of Hangzhou Mijia Technologies Co., Ltd. (incorporated by reference to Exhibit 10.25 of our
registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                                                    
|      | 
|4.33  |  | English translation of Equity Pledge Agreement, dated as of July 1, 2010, among Hangzhou Dianneng Technologies Co., Ltd., Hangzhou Mijia Technologies Co., Ltd. and shareholders
of Hangzhou Mijia Technologies Co., Ltd. (incorporated by reference to Exhibit 10.26 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                            
|      | 
|4.34  |  | English translation of Lease Contract, dated as of August 31, 2009, and its supplementary agreement, undated, among Yunian Huang, Qiulong Zhu and Hangzhou Sky Network
Technologies Co., Ltd. (incorporated by reference to Exhibit 10.27 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                        
|      | 
|4.35  |  | English translation of Lease Contract, dated as of April 17, 2010, among Xiaoming Wu, Yuhong Wang and Hangzhou Sky Network Technologies Co., Ltd. (incorporated by reference to
Exhibit 10.28 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                                    
|      | 
|4.36 |  | English Translation of the Mobile Phone Built-in Wireless Value-Added Business Cooperation Agreement between Hangzhou Fanyi Technologies Co. and Beijing Lei Ting Wan Jun Network
Technologies Co., Ltd., dated March 11, 2010, and its amendment dated June 10, 2010 (incorporated by reference to Exhibit 10.29 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the
Commission on November 19, 2010)
|      | 
|4.37 |  | English Translation of the Cooperation Agreement between Hangzhou Fanyi Technologies Co., Ltd. and Beijing Kongzhong Xinshi Information Technology Co., Ltd., dated November 16,
2009, and its amendment dated June 1, 2010 (incorporated by reference to Exhibit 10.30 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19,
2010)                                          
|      | 
|4.38 |  | English Translation of the Cooperation Agreement between Hangzhou Fanyi Technologies Co., Ltd. and Chongqing Renneng Software Co., Ltd., dated November 20, 2009 (incorporated
by reference to Exhibit 10.31 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 19, 2010)                                                                                                     
|      | 
|4.39  |  | English Translation of the Extension Agreement Between Hangzhou Fanyi Technologies Co., Ltd. and Beijing Kongzhong Xinshi Information Technology Co., Ltd., dated November 1,
2010 (incorporated by reference to Exhibit 10.32 of our registration statement on Form F-1 (File No. 333-170707), as amended, initially filed with the Commission on November 26, 2010)                                                                                   



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|      |  |                                                                                                                                                                                                                                                           
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|4.40  |  | Form of Director Agreement with independent directors of the Registrant (incorporated by reference to Exhibit 10.33 of our registration statement on Form F-1 (File No.
333-170707), as amended, initially filed with the Commission on November 19, 2010)
|      | 
|8.1*  |  | Subsidiaries of the Registrant                                                                                                                                                                                                                            
|      | 
|11.1  |  | Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 of our registration statement on Form F-1 (File No. 333-170707), as amended,
initially filed with the Commission on November 26, 2010)                   
|      | 
|12.1* |  | CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                               
|      | 
|12.2* |  | CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                               
|      | 
|13.1* |  | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                               
|      | 
|13.2* |  | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                               
|      | 
|15.1* |  | Consent of Jincheng Tongda & Neal Law Firm                                                                                                                                                                                                                
|      | 
|15.2* |  | Consent of Deloitte Touche Tohmatsu CPA Ltd.                                                                                                                                                                                                              
|      | 
|15.3* |  | Consent of Conyers Dill and Pearman (Cayman) Limited                                                                                                                                                                                                      



|* | Filed with this annual report on Form 20-F.
|- | -------------------------------------------

| | Order for confidential treatment of portions of this document has been granted by the Commission pursuant to Rule 406 of the Securities Act.
|- | --------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.



SKY-MOBI LIMITEDBy:

/s/ Michael Tao SongName: Michael Tao SongTitle: Chairman and Chief Executive Officer


Date: June 29, 2012



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SKY-MOBI LIMITED

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                  |  |         |     | 
|------------------------------------------------------------------------------------------------- |  | ------- | --- | 
|                                                                                                  |  | PAGE(S) |    
|                                                                                                  | 
|Reports of Independent Registered Public Accounting Firm                                          |  |         | F-2 | 
|Consolidated Statements of Comprehensive Income for the Years Ended March 31, 2010, 2011 and
2012 |  |         | F-4 | 
|Consolidated Statements of Financial Position as of March 31, 2010, 2011 and 2012                 |  |         | F-5 | 
|Consolidated Statements of Changes in Equity for the Years Ended March 31, 2010, 2011 and
2012    |  |         | F-6 | 
|Consolidated Statements of Cash Flows for the Years Ended March 31, 2010, 2011 and
2012           |  |         | F-7 | 
|Notes to the Consolidated Financial Statements                                                    |  |         | F-8 | 



F-1



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholders of

Sky-mobi Limited

We have
audited the accompanying consolidated statements of financial position of Sky-mobi Limited and subsidiaries (the Group) as of March 31, 2010, 2011 and 2012, and the related consolidated statements of comprehensive income, changes in
equity, and cash flows for each of the three years in the period ended March 31, 2012. These financial statements are the responsibility of the Groups management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position of Sky-mobi Limited and subsidiaries as of March 31, 2010, 2011 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended
March 31, 2012, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Groups internal control over financial reporting as of March 31,
2012, based on the criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 29, 2012 expressed an unqualified
opinion on the Groups internal control over financial reporting.

Our audits also comprehended the translation of
Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2. Such United States dollar amounts are presented solely for the convenience of readers in the
United States of America.

/s/ Deloitte Touche Tohmatsu CPA Ltd.

Shanghai, China

June 29, 2012



F-2



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholders of

Sky-mobi Limited

We have
audited the internal control over financial reporting of Sky-mobi Limited and subsidiaries (the Group) as of March 31, 2012, based on the criteria established in Internal Control  Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Groups management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Managements Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Groups internal control over financial reporting based on our
audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or
fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our
opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of March 31, 2012, based on the criteria established in Internal Control  Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended March 31, 2012 of the Group and our report dated June 29, 2012 expressed an unqualified opinion on those financial statements
and included an explanatory paragraph regarding the translation of Renmimbi amounts into United States dollar amounts for the convenience of readers in the United States of America.

/s/ Deloitte Touche Tohmatsu CPA Ltd.

Shanghai, China

June 29, 2012



F-3



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##### Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|------------------------------------------------------------------------------- |  | ------- |  | --------------------- | -------- | - | ------- |  | -------- | ------- |  |  | -------- | - |  |  | ------- | -
|                                                                                |  |         |  | Years Ended March 31, |         
|                                                                                |  | NOTES   |  | 2010                  |          |   | 2011    |  |          | 2012    |  |  | 2012     |  
|                                                                                |  |         |  | RMB000               |          |   | RMB000 |  |          | RMB000 |  |  | US$000  |  
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  | (Note 2) |  
|Revenues                                                                        |  | 6       |  |                       | 544,258  |   |         |  | 675,294  |         |  |  | 685,563  |   |  |  | 108,863 |  
|Cost of revenues from third parties                                             |  |         |  |                       | (353,106 | ) |         |  | (461,422 | )       |  |  | (465,479 | ) |  |  | (73,915 | )
|Cost of revenues from related parties                                           |  |         |  |                       | (1,245   | ) |         |  | (3,415   | )       |  |  | (5,546   | ) |  |  | (881    | )
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Gross profit                                                                    |  |         |  |                       | 189,907  |   |         |  | 210,457  |         |  |  | 214,538  |   |  |  | 34,067  |  
|Research and development expenses                                               |  |         |  |                       | (26,900  | ) |         |  | (52,260  | )       |  |  | (71,088  | ) |  |  | (11,289 | )
|Sales and marketing expenses                                                    |  |         |  |                       | (21,511  | ) |         |  | (38,200  | )       |  |  | (37,361  | ) |  |  | (5,933  | )
|General and administration expenses                                             |  |         |  |                       | (17,507  | ) |         |  | (98,938  | )       |  |  | (83,996  | ) |  |  | (13,338 | )
|Other operating income, net                                                     |  | 7       |  |                       |         |   |         |  |         |         |  |  | 3,675    |   |  |  | 584     |  
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Profit from operations                                                          |  |         |  |                       | 123,989  |   |         |  | 21,059   |         |  |  | 25,768   |   |  |  | 4,091   |  
|Other gains and losses                                                          |  | 8       |  |                       | 3,531    |   |         |  | 11,179   |         |  |  | 11,649   |   |  |  | 1,850   |  
|Impairment of investment in an associate                                        |  | 18      |  |                       |         |   |         |  | (5,760   | )       |  |  |         |   |  |  |        |  
|Finance costs                                                                   |  | 12 & 20 |  |                       | (5,417   | ) |         |  | (4,333   | )       |  |  |         |   |  |  |        |  
|Share of results of associates                                                  |  | 18      |  |                       | (1,255   | ) |         |  | (6,012   | )       |  |  | (886     | ) |  |  | (141    | )
|Gain (loss) on changes in fair value of convertible redeemable preferred shares |  | 20      |  |                       | (290,135 | ) |         |  | 106,684  |         |  |  |         |   |  |  |        |  
|Gain (loss) on changes in fair value of warrants                                |  | 20      |  |                       | (7,548   | ) |         |  | 7,377    |         |  |  |         |   |  |  |        |  
|Loss on modification of convertible redeemable preferred shares                 |  | 20      |  |                       | (44,439  | ) |         |  |         |         |  |  |         |   |  |  |        |  
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Profit (loss) before tax                                                        |  | 9       |  |                       | (221,274 | ) |         |  | 130,194  |         |  |  | 36,531   |   |  |  | 5,800   |  
|Income tax benefit (expense)                                                    |  | 10      |  |                       | (8,528   | ) |         |  | 5,367    |         |  |  | (3,602   | ) |  |  | (572    | )
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Profit (loss) for the year                                                      |  |         |  |                       | (229,802 | ) |         |  | 135,561  |         |  |  | 32,929   |   |  |  | 5,228   |  
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total comprehensive income (loss) for the year                                  |  |         |  |                       | (229,802 | ) |         |  | 135,561  |         |  |  | 32,929   |   |  |  | 5,228   |  
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Profit (loss) and total comprehensive income (loss) attributable to:            |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Owners of the Company                                                           |  |         |  |                       | (229,802 | ) |         |  | 136,310  |         |  |  | 32,969   |   |  |  | 5,234   |  
|Non-controlling interests                                                       |  |         |  |                       |         |   |         |  | (749     | )       |  |  | (40      | ) |  |  | (6      | )
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|                                                                                |  |         |  |                       | (229,802 | ) |         |  | 135,561  |         |  |  | 32,929   |   |  |  | 5,228   |  
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|                                                                                |  |         |  |                       |         
|Earnings (loss) per share:                                                      |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Basic                                                                           |  | 11      |  |                       | (1.53    | ) |         |  | 0.74     |         |  |  | 0.13     |   |  |  | 0.02    |  
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Diluted                                                                         |  | 11      |  |                       | (1.53    | ) |         |  | 0.06     |         |  |  | 0.13     |   |  |  | 0.02    |  
|                                                                                |  |         |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  



F-4



---

##### Table of Contents

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- |  | ------------ | -------- | - | ------- |  | -------- | ------- |  |  | -------- | - |  |  | ------- | -
|                                                                                                                                                                                              |  |       |  | At March 31, |         
|                                                                                                                                                                                              |  | NOTES |  | 2010         |          |   | 2011    |  |          | 2012    |  |  | 2012     |  
|                                                                                                                                                                                              |  |       |  | RMB000      |          |   | RMB000 |  |          | RMB000 |  |  | US$000  |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  | (Note 2) |  
|ASSETS                                                                                                                                                                                        |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Current assets                                                                                                                                                                                |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Cash and cash equivalents                                                                                                                                                                     |  | 13    |  |              | 75,105   |   |         |  | 367,214  |         |  |  | 137,538  |   |  |  | 21,840  |  
|Term deposits                                                                                                                                                                                 |  | 13    |  |              | 50,000   |   |         |  | 152,718  |         |  |  | 438,393  |   |  |  | 69,614  |  
|Investment at fair value through profit or loss                                                                                                                                               |  | 14    |  |              | 15,442   |   |         |  |         |         |  |  |         |   |  |  |        |  
|Loan receivable                                                                                                                                                                               |  | 15    |  |              | 25,785   |   |         |  |         |         |  |  |         |   |  |  |        |  
|Trade and other receivables                                                                                                                                                                   |  | 16    |  |              | 76,110   |   |         |  | 86,181   |         |  |  | 103,372  |   |  |  | 16,415  |  
|Amounts due from related parties                                                                                                                                                              |  | 23    |  |              | 2,784    |   |         |  | 489      |         |  |  | 126      |   |  |  | 20      |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total current assets                                                                                                                                                                          |  |       |  |              | 245,226  |   |         |  | 606,602  |         |  |  | 679,429  |   |  |  | 107,889 |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Non-current assets                                                                                                                                                                            |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Property and equipment                                                                                                                                                                        |  | 17    |  |              | 31,046   |   |         |  | 43,285   |         |  |  | 32,856   |   |  |  | 5,217   |  
|Investments in associates                                                                                                                                                                     |  | 18    |  |              | 11,772   |   |         |  |         |         |  |  | 714      |   |  |  | 113     |  
|Other non-current assets                                                                                                                                                                      |  |       |  |              |         |   |         |  |         |         |  |  | 3,542    |   |  |  | 563     |  
|Deferred tax assets                                                                                                                                                                           |  | 10    |  |              | 4,447    |   |         |  | 6,656    |         |  |  | 2,210    |   |  |  | 351     |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total non-current assets                                                                                                                                                                      |  |       |  |              | 47,265   |   |         |  | 49,941   |         |  |  | 39,322   |   |  |  | 6,244   |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total assets                                                                                                                                                                                  |  |       |  |              | 292,491  |   |         |  | 656,543  |         |  |  | 718,751  |   |  |  | 114,133 |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|                                                                                                                                                                                              |  |       |  |              |         
|EQUITY AND LIABILITIES                                                                                                                                                                        |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Current liabilities                                                                                                                                                                           |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Trade and other payables                                                                                                                                                                      |  | 19    |  |              | 103,564  |   |         |  | 135,779  |         |  |  | 121,932  |   |  |  | 19,362  |  
|Income tax liabilities                                                                                                                                                                        |  |       |  |              | 3,318    |   |         |  | 11,797   |         |  |  | 5,675    |   |  |  | 901     |  
|Amounts due to related parties                                                                                                                                                                |  | 23    |  |              | 6,137    |   |         |  | 895      |         |  |  | 871      |   |  |  | 138     |  
|Deferred revenue                                                                                                                                                                              |  |       |  |              |         |   |         |  | 6,532    |         |  |  | 10,038   |   |  |  | 1,594   |  
|Warrants                                                                                                                                                                                      |  | 20    |  |              | 27,188   |   |         |  |         |         |  |  |         |   |  |  |        |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total current liabilities                                                                                                                                                                     |  |       |  |              | 140,207  |   |         |  | 155,003  |         |  |  | 138,516  |   |  |  | 21,995  |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Non-current liabilities                                                                                                                                                                       |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Convertible redeemable preferred shares (liquidation value: RMB23,892,000 (US$3,500,000) nil, and nil as of March 31, 2010,
2011 and 2012, respectively)                                      |  | 20    |  |              | 451,491  |   |         |  |         |         |  |  |         |   |  |  |        |  
|Deferred tax liabilities                                                                                                                                                                      |  | 10    |  |              | 8,305    |   |         |  |         |         |  |  |         |   |  |  |        |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total non-current liabilities                                                                                                                                                                 |  |       |  |              | 459,796  |   |         |  |         |         |  |  |         |   |  |  |        |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total liabilities                                                                                                                                                                             |  |       |  |              | 600,003  |   |         |  | 155,003  |         |  |  | 138,516  |   |  |  | 21,995  |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Equity (deficit)                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Share capital (US$0.00005 par value, 937,857,200 shares authorized; 150,000,000, 257,389,800 and 258,174,600
shares issued and outstanding as of March 31, 2010, 2011 and 2012, respectively) |  | 21    |  |              | 57       |   |         |  | 92       |         |  |  | 92       |   |  |  | 15      |  
|Share premium                                                                                                                                                                                 |  |       |  |              |         |   |         |  | 635,116  |         |  |  | 642,495  |   |  |  | 102,024 |  
|Reserves                                                                                                                                                                                      |  |       |  |              | 62,648   |   |         |  | 112,938  |         |  |  | 152,526  |   |  |  | 24,220  |  
|Statutory reserve                                                                                                                                                                             |  |       |  |              | 500      |   |         |  | 1,000    |         |  |  | 1,000    |   |  |  | 159     |  
|Accumulated deficit                                                                                                                                                                           |  |       |  |              | (370,717 | ) |         |  | (247,907 | )       |  |  | (214,938 | ) |  |  | (34,131 | )
|Subscription receivables                                                                                                                                                                      |  |       |  |              |         |   |         |  |         |         |  |  | (1,284   | ) |  |  | (204    | )
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Equity (deficit) attributable to owners of the Company                                                                                                                                        |  |       |  |              | (307,512 | ) |         |  | 501,239  |         |  |  | 579,891  |   |  |  | 92,083  |  
|Non-controlling interests                                                                                                                                                                     |  |       |  |              |         |   |         |  | 301      |         |  |  | 344      |   |  |  | 55      |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total equity (deficit)                                                                                                                                                                        |  |       |  |              | (307,512 | ) |         |  | 501,540  |         |  |  | 580,235  |   |  |  | 92,138  |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Total equity (deficit) and liabilities                                                                                                                                                        |  |       |  |              | 292,491  |   |         |  | 656,543  |         |  |  | 718,751  |   |  |  | 114,133 |  
|                                                                                                                                                                                              |  |       |  |              |          |   |         |  |          |         |  |  |          |   |  |  |         |  



F-5



---

##### Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



|                                                                                 |  |              |    |  |              |  |         |            |  |  |                  |   |  |                         |       |  |                    |  |        |                                                  |  |  |                          |   |  |         |          |   |  |  |       |   |  |  |          |  
|-------------------------------------------------------------------------------- |  | ------------ | -- |  | ------------ |  | ------- | ---------- |  |  | ---------------- | - |  | ----------------------- | ----- |  | ------------------ |  | ------ | ------------------------------------------------ |  |  | ------------------------ | - |  | ------- | -------- | - |  |  | ----- | - |  |  | -------- | -
|                                                                                 |  | Sharecapital |    |  | Sharepremium |  |         | Reserves * |  |  | Statutoryreserve |   |  | SubscriptionReceivables |       |  | Accumulateddeficit |  |        | Total equityattributable 
toowners ofthe Company |  |  | Non-controllinginterests |   |  | Total   |         
|                                                                                 |  | RMB000      |    |  | RMB000      |  |         | RMB000    |  |  | RMB000          |   |  | RMB000                 |       |  | RMB000            |  |        | RMB000                                          |  |  | RMB000                  |   |  | RMB000 |         
|                                                                                 |  |              |    |  |              |  |         |            | 
|Balance at April 1, 2009                                                         |  |              | 57 |  |              |  |        |            |  |  | 14,603           |   |  |                         |      |  |                    |  |       |                                                  |  |  | (124,165                 | ) |  |         | (109,505 | ) |  |  |      |   |  |  | (109,505 | )
|Loss and total comprehensive loss for the year                                   |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  | (229,802                 | ) |  |         | (229,802 | ) |  |  |      |   |  |  | (229,802 | )
|Modification of convertible redeemable preferred shares                          |  |              |   |  |              |  |        |            |  |  | 44,439           |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         | 44,439   |   |  |  |      |   |  |  | 44,439   |  
|Dividends                                                                        |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  | (16,250                  | ) |  |         | (16,250  | ) |  |  |      |   |  |  | (16,250  | )
|Transfer to statutory reserves                                                   |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         | 500   |  |                    |  |       |                                                  |  |  | (500                     | ) |  |         |         |   |  |  |      |   |  |  |         |  
|Share-based compensation                                                         |  |              |   |  |              |  |        |            |  |  | 3,606            |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         | 3,606    |   |  |  |      |   |  |  | 3,606    |  
|                                                                                 |  |              |    |  |              |  |         |            |  |  |                  |   |  |                         |       |  |                    |  |        |                                                  |  |  |                          |   |  |         |          |   |  |  |       |   |  |  |          |  
|Balance at March 31, 2010                                                        |  |              | 57 |  |              |  |        |            |  |  | 62,648           |   |  |                         | 500   |  |                    |  |       |                                                  |  |  | (370,717                 | ) |  |         | (307,512 | ) |  |  |      |   |  |  | (307,512 | )
|Capital injection from non-controlling interests                                 |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         |         |   |  |  | 1,050 |   |  |  | 1,050    |  
|Issue of new shares upon modification of convertible redeemable preferred shares |  |              | 2  |  |              |  |        |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         | 2        |   |  |  |      |   |  |  | 2        |  
|Issuance of shares upon initial public offering                                  |  |              | 15 |  |              |  | 303,133 |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         | 303,148  |   |  |  |      |   |  |  | 303,148  |  
|Transaction costs attributable to issue of new shares                            |  |              |   |  |              |  | (20,377 | )          |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         | (20,377  | ) |  |  |      |   |  |  | (20,377  | )
|Conversion of convertible redeemable preferred shares and warrants               |  |              | 18 |  |              |  | 352,360 |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         | 352,378  |   |  |  |      |   |  |  | 352,378  |  
|Transfer to statutory reserves                                                   |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         | 500   |  |                    |  |       |                                                  |  |  | (500                     | ) |  |         |         |   |  |  |      |   |  |  |         |  
|Profit and total comprehensive profit for the year                               |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  | 136,310                  |   |  |         | 136,310  |   |  |  | (749  | ) |  |  | 135,561  |  
|Dividends                                                                        |  |              |    |  |              |  |         |            |  |  |                  |   |  |                         |       |  |                    |  |        |                                                  |  |  | (13,000                  | ) |  |         | (13,000  | ) |  |  |      |   |  |  | (13,000  | )
|Share-based compensation                                                         |  |              |   |  |              |  |        |            |  |  | 50,290           |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         | 50,290   |   |  |  |      |   |  |  | 50,290   |  
|                                                                                 |  |              |    |  |              |  |         |            |  |  |                  |   |  |                         |       |  |                    |  |        |                                                  |  |  |                          |   |  |         |          |   |  |  |       |   |  |  |          |  
|Balance at March 31, 2011                                                        |  |              | 92 |  |              |  | 635,116 |            |  |  | 112,938          |   |  |                         | 1,000 |  |                    |  |       |                                                  |  |  | (247,907                 | ) |  |         | 501,239  |   |  |  | 301   |   |  |  | 501,540  |  
|Profit and total comprehensive profit for the year                               |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  | 32,969                   |   |  |         | 32,969   |   |  |  | (40   | ) |  |  | 32,929   |  
|Share-based compensation                                                         |  |              |   |  |              |  |        |            |  |  | 45,683           |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         | 45,683   |   |  |  |      |   |  |  | 45,683   |  
|Derecognition of a subsidiary                                                    |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         |         |   |  |  | (301  | ) |  |  | (301     | )
|Capital injection from non-controlling shareholder                               |  |              |   |  |              |  |        |            |  |  |                 |   |  |                         |      |  |                    |  |       |                                                  |  |  |                         |   |  |         |         |   |  |  | 384   |   |  |  | 384      |  
|Exercise of share options                                                        |  |              |   |  |              |  | 7,379   |            |  |  | (6,095           | ) |  |                         |      |  |                    |  | (1,284 | )                                                |  |  |                         |   |  |         |         |   |  |  |      |   |  |  |         |  
|                                                                                 |  |              |    |  |              |  |         |            |  |  |                  |   |  |                         |       |  |                    |  |        |                                                  |  |  |                          |   |  |         |          |   |  |  |       |   |  |  |          |  
|Balance at March 31, 2012                                                        |  |              | 92 |  |              |  | 642,495 |            |  |  | 152,526          |   |  |                         | 1,000 |  |                    |  | (1,284 | )                                                |  |  | (214,938                 | ) |  |         | 579,891  |   |  |  | 344   |   |  |  | 580,235  |  
|                                                                                 |  |              |    |  |              |  |         |            |  |  |                  |   |  |                         |       |  |                    |  |        |                                                  |  |  |                          |   |  |         |          |   |  |  |       |   |  |  |          |  



|* | Reserves include share option reserves and reserve from the modification of convertible redeemable preferred shares (note 20). At the time when the share options are
exercised, the amount previously recognized in reserves will be transferred to share premium.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-6



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##### Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|---------------------------------------------------------------------------------------------- |  | --------------------- | -------- | - | ------- |  | -------- | ------- |  |  | -------- | - |  |  | ------- | -
|                                                                                               |  | Years Ended March 31, |         
|                                                                                               |  | 2010                  |          |   | 2011    |  |          | 2012    |  |  | 2012     |  
|                                                                                               |  | RMB000               |          |   | RMB000 |  |          | RMB000 |  |  | US$000  |  
|                                                                                               |  |                       |          |   |         |  |          |         |  |  | (Note 2) |  
|Operating activities                                                                           |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Profit (loss) before tax                                                                       |  |                       | (221,274 | ) |         |  | 130,194  |         |  |  | 36,531   |   |  |  | 5,800   |  
|Adjustments for:                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Share of results of associates                                                                 |  |                       | 1,255    |   |         |  | 6,012    |         |  |  | 886      |   |  |  | 141     |  
|Gain on derecognition of a subsidiary                                                          |  |                       |         |   |         |  |         |         |  |  | (1,930   | ) |  |  | (306    | )
|Net foreign exchange gain (loss)                                                               |  |                       | (250     | ) |         |  | (7,941   | )       |  |  | 3,266    |   |  |  | 519     |  
|Interest income                                                                                |  |                       | (1,060   | ) |         |  | (2,726   | )       |  |  | (12,110  | ) |  |  | (1,923  | )
|Amortization of government grant related to property and equipment                             |  |                       |         |   |         |  |         |         |  |  | (1,468   | ) |  |  | (233    | )
|Loss on disposal of property and equipment                                                     |  |                       | 56       |   |         |  | 44       |         |  |  |         |   |  |  |        |  
|Depreciation and amortization                                                                  |  |                       | 2,452    |   |         |  | 15,601   |         |  |  | 21,082   |   |  |  | 3,348   |  
|Change in fair value of investment at FVTPL                                                    |  |                       | (442     | ) |         |  | (404     | )       |  |  |         |   |  |  |        |  
|Income on loan receivable                                                                      |  |                       | (1,148   | ) |         |  | (193     | )       |  |  | (450     | ) |  |  | (71     | )
|Loss (gain) on changes in fair value of convertible redeemable preferred shares                |  |                       | 290,135  |   |         |  | (106,684 | )       |  |  |         |   |  |  |        |  
|Loss (gain) on changes in fair value of warrants                                               |  |                       | 7,548    |   |         |  | (7,377   | )       |  |  |         |   |  |  |        |  
|Loss on modification of convertible redeemable preferred shares                                |  |                       | 44,439   |   |         |  |         |         |  |  |         |   |  |  |        |  
|Share-based compensation                                                                       |  |                       | 3,606    |   |         |  | 50,290   |         |  |  | 45,683   |   |  |  | 7,254   |  
|Finance costs                                                                                  |  |                       | 5,417    |   |         |  | 4,333    |         |  |  |         |   |  |  |        |  
|Impairment of investment in an associate                                                       |  |                       |         |   |         |  | 5,760    |         |  |  |         |   |  |  |        |  
|Changes in working capital:                                                                    |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Increase in trade and other receivables                                                        |  |                       | (28,689  | ) |         |  | (10,071  | )       |  |  | (18,856  | ) |  |  | (2,994  | )
|Increase (decrease) in trade and other payables                                                |  |                       | 58,012   |   |         |  | 49,863   |         |  |  | (11,981  | ) |  |  | (1,903  | )
|Increase (decrease) in amounts due to related parties                                          |  |                       | 612      |   |         |  | 175      |         |  |  | (24      | ) |  |  | (4      | )
|Increase in deferred revenue                                                                   |  |                       |         |   |         |  | 6,532    |         |  |  | 3,017    |   |  |  | 479     |  
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Cash generated from operations                                                                 |  |                       | 160,669  |   |         |  | 133,408  |         |  |  | 63,646   |   |  |  | 10,107  |  
|Income tax paid                                                                                |  |                       | (163     | ) |         |  | (123     | )       |  |  | (6,551   | ) |  |  | (1,040  | )
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Net cash from operating activities                                                             |  |                       | 160,506  |   |         |  | 133,285  |         |  |  | 57,095   |   |  |  | 9,067   |  
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|                                                                                               |  |                       |          |  
|Investing activities                                                                           |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Interest income received                                                                       |  |                       | 1,060    |   |         |  | 2,726    |         |  |  | 12,110   |   |  |  | 1,923   |  
|Proceeds from disposal of a subsidiary                                                         |  |                       |         |   |         |  |         |         |  |  | 205      |   |  |  | 33      |  
|Increase of term deposits                                                                      |  |                       | (35,000  | ) |         |  | (102,718 | )       |  |  | (285,675 | ) |  |  | (45,363 | )
|Purchases of property and equipment                                                            |  |                       | (16,024  | ) |         |  | (42,181  | )       |  |  | (11,339  | ) |  |  | (1,801  | )
|Receipt of government grant related to acquisition of property and equipment                   |  |                       |         |   |         |  |         |         |  |  | 1,957    |   |  |  | 311     |  
|Proceeds from disposal of property and equipment                                               |  |                       |         |   |         |  | 105      |         |  |  | 40       |   |  |  | 6       |  
|Investments in associates (including down payment)                                             |  |                       | (12,510  | ) |         |  |         |         |  |  | (1,100   | ) |  |  | (175    | )
|Investments in available-for-sale investment                                                   |  |                       |         |   |         |  |         |         |  |  | (900     | ) |  |  | (143    | )
|Purchase of investment at FVTPL                                                                |  |                       | (15,000  | ) |         |  |         |         |  |  |         |   |  |  |        |  
|Payment for loan receivable                                                                    |  |                       | (25,000  | ) |         |  |         |         |  |  | (19,550  | ) |  |  | (3,104  | )
|Redemption of investments at FVTPL                                                             |  |                       |         |   |         |  | 15,846   |         |  |  |         |   |  |  |        |  
|Receipt of loan receivable                                                                     |  |                       |         |   |         |  | 25,000   |         |  |  | 19,550   |   |  |  | 3,104   |  
|Advance to related parties                                                                     |  |                       | (2,279   | ) |         |  |         |         |  |  |         |   |  |  |        |  
|Repayment from related parties                                                                 |  |                       | 7,627    |   |         |  | 2,295    |         |  |  | 363      |   |  |  | 58      |  
|Investment income received                                                                     |  |                       | 363      |   |         |  | 978      |         |  |  | 450      |   |  |  | 71      |  
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Net cash used in investing activities                                                          |  |                       | (96,763  | ) |         |  | (97,949  | )       |  |  | (283,889 | ) |  |  | (45,080 | )
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|                                                                                               |  |                       |          |  
|Financing activities                                                                           |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Capital contribution from non-controlling shareholder                                          |  |                       |         |   |         |  | 1,050    |         |  |  | 384      |   |  |  | 61      |  
|Proceeds from issue of new shares upon modification of convertible redeemable preferred shares |  |                       |         |   |         |  | 2        |         |  |  |         |   |  |  |        |  
|Proceeds from issue of shares upon initial public offering                                     |  |                       |         |   |         |  | 303,148  |         |  |  |         |   |  |  |        |  
|Payments of transaction costs attributable to issue of new shares                              |  |                       |         |   |         |  | (20,377  | )       |  |  |         |   |  |  |        |  
|Dividends paid to preference shareholders (note 12)                                            |  |                       |         |   |         |  | (9,750   | )       |  |  |         |   |  |  |        |  
|Dividends paid                                                                                 |  |                       | (16,250  | ) |         |  | (13,000  | )       |  |  |         |   |  |  |        |  
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Net cash (used in) from financing activities                                                   |  |                       | (16,250  | ) |         |  | 261,073  |         |  |  | 384      |   |  |  | 61      |  
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|                                                                                               |  |                       |          |  
|Net increase (decrease) in cash and cash equivalents                                           |  |                       | 47,493   |   |         |  | 296,409  |         |  |  | (226,410 | ) |  |  | (35,952 | )
|Cash and cash equivalents at beginning of year                                                 |  |                       | 27,618   |   |         |  | 75,105   |         |  |  | 367,214  |   |  |  | 58,311  |  
|Effect of foreign exchange rate changes on the balance of cash held in foreign currencies      |  |                       | (6       | ) |         |  | (4,300   | )       |  |  | (3,266   | ) |  |  | (519    | )
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  
|Cash and cash equivalents at end of year                                                       |  |                       | 75,105   |   |         |  | 367,214  |         |  |  | 137,538  |   |  |  | 21,840  |  
|                                                                                               |  |                       |          |   |         |  |          |         |  |  |          |   |  |  |         |  

Supplemental information of non-cash transaction:

During the years ended March 31, 2010, 2011 and 2012, acquisitions of property and equipment amounted to approximately
RMB15,083,000, RMB891,000 and RMB398,000, respectively, were unsettled and included in other payables.



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##### Table of Contents

SKY-MOBI LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



|1. | ORGANIZATION AND PRINCIPAL ACTIVITIES
|-- | -------------------------------------

Sky-mobi Limited (the Company) was incorporated as an exempted company with limited liability under the laws of the Cayman Islands on April 20, 2007. The Company through its subsidiaries
(collectively referred to as the Group) is principally engaged in the operation of a mobile application platform embedded on mobile phones to provide mobile application store and services in the Peoples Republic of China (the
PRC). The address of the principal place of the Groups business is 10/F, Building B, United Building, No. 2 Zijinghua Road, Hangzhou, Zhejiang Province, PRC. The Companys registered office is located at Cricket Square,
Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

The consolidated financial statements of the
Group are presented in Renminbi (RMB), which is the functional currency of the Company.

The Company holds its
interests in its operating subsidiaries through Pusida (Beijing) Technologies Co., Ltd. (Pusida), Hangzhou Dianneng Technologies Co., Ltd. (Dianneng) and Hangzhou Tiandian Investment Consulting Co., Ltd.
(Tiandian) (collectively the PRC holding entities), which were established in the PRC on June 12, 2007, December 24, 2009 and December 6, 2011, respectively. The Company does not conduct any substantive
operations of its own, but conducts its primary business operation through Hangzhou Sky Network Technologies Co., Ltd. (Sky), Hangzhou Mijia Technologies Co., Ltd. (Mijia), Hangzhou Fanyi Technologies Co., Ltd.
(Fanyi), Hangzhou Feineng Technologies Co., Ltd. (Feineng) and Hangzhou Sky Investment Co., Ltd. (Sky Investment) (collectively the PRC Operational Entities, or the special purpose
entities), which are controlled by Dianneng and Tiandian through certain contractual arrangements as of March 31, 2012.

On November 3, 2009, Mr. Song Tao, chairman and chief executive officer of the Company, acquired the equity interest of Fanyi from its original owner at a price equal to its net asset value of
RMB100,000. Prior to this transaction, Fanyi was a shell company and had not yet commenced its business operations. On December 3, 2010 and October 31, 2011, Mr. Song Tao established Feineng and Sky Investment, respectively.

PRC laws and regulations restrict foreign ownership of telecommunication businesses. To comply with these foreign ownership
restrictions, Pusida entered into certain exclusive agreements with the equity holders of Mijia and Sky on August 1, 2007 and then Pusida transferred these exclusive agreements with the equity holders of Mijia and Sky to Dianneng on
July 1, 2010. In addition, Dianneng entered into certain exclusive agreements with the equity holders of Fanyi and Feineng on December 24, 2009 and December 3, 2010, respectively. Tiandian entered into certain exclusive agreements
with the equity holders of Sky Investment on December 6, 2011. The exclusive agreements, namely, Exclusive Business Cooperation or Services Agreements, Purchase Option Agreements, Equity Pledge Agreements and Power of Attorney Agreements, taken
as a whole, permit the financial results of the PRC Operational Entities and economic benefits of their businesses to flow to the Company. In addition, all the directors in each of the PRC Operational Entities shall be assigned by the Company.
Accordingly, the Company is able to monitor, supervise and effectively control the PRC Operational Entities businesses, operations and financial policies so as to ensure and facilitate the implementation of these exclusive agreements. In
addition, through such agreements, the Company is able to acquire the shareholding in the PRC Operational Entities when permitted by PRC law.

Following is a summary of the material provisions of the aforementioned agreements:

Exclusive Business Cooperation or Services Agreements.The equity owners of the special purpose entities (SPEs) have entered into exclusive business cooperation or services
agreements with the PRC holding entities under which SPEs engage the relevant PRC holding entities as their exclusive providers of technical and business support and strategy consulting services. SPEs shall pay to the relevant PRC holding entities
service fees and royalties. Each agreement has a term of 10 years or 20 years and is renewable at the PRC holding entities sole discretion.

Purchase Option Agreements.The equity owners of the relevant SPEs have granted the relevant PRC holding entities or their designees an option to purchase all or part of their equity
interests in the relevant SPEs, or all or part of the assets of the relevant SPEs, for a purchase price equal to the registered capital of the relevant SPEs or such higher price as required under PRC law at the time of purchase, at any time
determined by the relevant PRC holding entities and to the extent permitted by PRC law. Also each relevant shareholder has agreed not to transfer, assign, pledge or otherwise dispose of their interest in the relevant SPE without the prior written
consent of the relevant PRC holding entities. The agreement of Fanyi has a term of 10 years and is renewable at Diannengs sole discretion. The purchase option agreement of the remaining SPEs will terminate when the equity interests in the SPEs
are legally transferred to the relevant PRC holding entities.



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##### Table of Contents

Equity Pledge Agreements.The equity owners of the SPEs pledge their
respective equity interest in the relevant SPEs, to certain of the PRC holding entities to secure their obligations under the respective exclusive business cooperation or services agreements. The equity pledge agreements are continuously effective
until the full performance of the contractual obligations and the full repayment of the liabilities under the exclusive cooperation or services agreements.

Power of Attorney.The equity owners of the SPEs have executed a power of attorney to irrevocably grant to certain PRC holding entities or their designees the power of attorney to exercise
all of their rights as shareholders of SPEs, including the right to declare dividends, appoint and elect board members and senior management members and other voting rights. The agreement of Fanyi does not contain any expiration provision. Each
power of attorney of the remaining SPEs has a term of 10 years or 20 years.

Effective control over the PRC Operational
Entities businesses was transferred to the Company through the series of contractual arrangements without transferring legal ownership in the PRC Operational Entities (Reorganization). As a result of these contractual arrangements,
the Company has the ability to approve decisions made by the PRC Operational Entities and is entitled to substantially all of the associated economic benefits. Accordingly, the Company consolidates the PRC Operational Entities. Immediately before
and after the Reorganization, Mr. Song Tao controlled the PRC Operational Entities. As such, the consolidated financial statements are prepared as if the current group structure had been in existence throughout the years, or since the
respective date of incorporation / establishment of the relevant entity, where this is a shorter period. The net assets of the combining entities were consolidated using the existing book values.

Risks in relation to the SPE structure are disclosed in Note 4.

In November 2010, the Company approved a 200-for-1 share split on both its common and preferred shares. Subsequent to the split, the Company had authorized 937,857,200 common shares with a par value
of US$0.00005 per share and 62,142,800 Series A Shares with a par value of US$0.00005 per share. All share and per share data has been retroactively restated to reflect this split.

At March 31, 2012, the Company had direct and indirect interests in the following major subsidiaries and consolidated SPEs:



|                                                               |  |                                            |  |                                                               |      |   |                      |      |     |   |  |  |     |   |  |                                                                                        
|-------------------------------------------------------------- |  | ------------------------------------------ |  | ------------------------------------------------------------- | ---- | - | -------------------- | ---- | --- | - |  |  | --- | - |  | ---------------------------------------------------------------------------------------
|Company name                                                   |  | Place and dateofestablishmentand
operation |  | Portion of ownershipinterest
andvoting power held atMarch 31, |      |   | Principal activities
|                                                               |  | 2010                                       |  |                                                               | 2011 |   |                      | 2012 |     |  
|                                                               |  |                                            |  |                                                               |     
|Subsidiaries:                                                  |  |                                            |  |                                                               |      |   |                      |      |     |   |  |  |     |   |  |                                                                                        
|Pusida (Beijing) Technologies Co., Ltd. (Pusida)             |  | PRCJune 12,2007                            |  |                                                               | 100  | % |                      |      | 100 | % |  |  | 100 | % |  | Provision of management consultancy and technical services                             
|Hangzhou Dianneng Technologies Co., Ltd. (Dianneng)          |  | PRCDecember 24,2009                        |  |                                                               | 100  | % |                      |      | 100 | % |  |  | 100 | % |  | Provision of management consultancy and technical services                             
|Profit Star Software (Hong Kong) Limited (Profit Star HK)    |  | Hong KongMay 25,2010                       |  |                                                               | Nil  |   |                      |      | 100 | % |  |  | 100 | % |  | Intermediary investment holding                                                        
|JSky Technology Limited (JSky)                               |  | CaymanAugust 9,2011                        |  |                                                               | Nil  |   |                      |      | Nil |   |  |  | 60  | % |  | Provision of mobile application services                                               
|Powerplay Technology Limited (Powerplay)                     |  | Hong KongSeptember 14,2011                 |  |                                                               | Nil  |   |                      |      | Nil |   |  |  | 100 | % |  | Provision of mobile application services                                               
|Hangzhou Tiandian Investment Consulting Co., Ltd. (Tiandian) |  | PRCDecember 6,2011                         |  |                                                               | Nil  |   |                      |      | Nil |   |  |  | 100 | % |  | Investment and consulting                                                              
|Consolidated SPEs:                                             |  |                                            |  |                                                               |      |   |                      |      |     |   |  |  |     |   |  |                                                                                        
|Hangzhou Sky Network Technologies Co., Ltd. (Sky)            |  | PRCNovember 21,2005                        |  |                                                               | 100  | % |                      |      | 100 | % |  |  | 100 | % |  | Development of mobile application software and provision of mobile application services
|Hangzhou Mijia Technologies Co., Ltd. (Mijia)                |  | PRCJanuary 12,2007                         |  |                                                               | 100  | % |                      |      | 100 | % |  |  | 100 | % |  | Development of mobile application software and provision of mobile application services
|Hangzhou Fanyi Technologies Co., Ltd. (Fanyi)                |  | PRCJuly 13,2009                            |  |                                                               | 100  | % |                      |      | 100 | % |  |  | 100 | % |  | Provision of mobile application services                                               
|Hangzhou Feineng Technologies Co., Ltd. (Feineng)            |  | PRCDecember 3,2010                         |  |                                                               | Nil  |   |                      |      | 100 | % |  |  | 100 | % |  | Provision of mobile application services                                               



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##### Table of Contents

The above table lists the subsidiaries of the Group which, in the opinion of the Directors,
principally affected the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.



|2. | SIGNIFICANT ACCOUNTING POLICIES
|-- | -------------------------------

Statement of compliance

The Groups consolidated financial
statements comply with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB).

Basis of preparation

The Groups consolidated financial
statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value as explained in the accounting policies set out below. Historical cost is generally based on fair value of the
consideration given in exchange of assets, goods or services.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its entities, including SPEs, controlled by
the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income
from the effective date of acquisition and up to the effective date of disposal, as appropriate.

All intra-group
transactions, balances, income and expenses are eliminated in consolidation.

Non-controlling interests in subsidiaries are
presented separately from the Groups equity.



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##### Table of Contents

Investments in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint
venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of
accounting. Under the equity method, investments in associates are carried in the consolidated statements of financial position at cost as adjusted for post-acquisition changes in the Groups share of the profit or loss and other comprehensive
income of the associate, less any impairment in the value of the investment. When the Groups share of the loss of an associate equals or exceeds its interest in that associate, the Group discontinues recognizing its share of further losses. An
additional share of losses is provided for and a liability is recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

The difference between the cost of the investment in associates and the amount of underlying equity in net assets of the associates is
included in the carrying amount of the investment. The entire carrying amount of the investment is tested for impairment as a whole. Any reversal of impairment loss is recognized to the extent that the recoverable amount of the investment
subsequently increases.

When a group entity transacts with an associate of the Group, profits and losses are eliminated to
the extent of the Groups interest in the relevant associate.

Revenue recognition

Application Store Revenues

Revenue is recognized when it is probable that the economic benefits will flow to the Group, the revenue can be measured reliably and
collectability is reasonably assured.

The Group generates revenue principally from the sale of a wide range of mobile
applications and contents, such as single-player games, mobile music and books, mobile social games, social network functions and other contents, to mobile handset users. Customers can download and purchase the mobile applications and contents from
the Groups application store, Maopao Platform. The mobile application store is a platform that allows users of mobile phones to browse and download applications and content. The Group has cooperation agreements with handset companies to
pre-install the Maopao Platform on mobile handsets before they reach users. The applications and contents are predominantly delivered to customers through mobile network operators in China. The Group contracts with mobile service providers, who
further contract with and utilize mobile network operators billing channels, to collect payment from the Groups customers on behalf of the Group. Mobile service providers and mobile network operators, through the mobile service
providers, are entitled to commissions, which are a percentage of the gross fees collected from the Groups customers by the mobile network operators.

For application store revenues from the sale of applications and contents, the Group recognizes revenue on a gross basis at the time when each application or content is successfully downloaded and the
collectability is reasonably assured. The Group recognizes the commissions retained by mobile service providers and mobile network operators as a cost of revenues in the consolidated statements of comprehensive income.

Users purchase in-game virtual premium items in certain single-player games. As the virtual items are immediately consumed, revenue is
recognized upon consumption.

Maopao Community Revenues through K Currency

The Group offers its own virtual currency, or K Currency, for members of its Maopao Community to purchase in-game virtual items in
its community-based applications, including mobile social games and social network applications. Such revenues are called Maopao Community revenues through K Currency.

As an alternative to utilizing mobile service providers, the Group also contracts with independent payment processing agents to process prepaid cards or online payment solutions into customer accounts.
Customer accounts are charged up with cash credit, which may be converted into K Currency. The majority of Maopao Community revenues are collected through K Currency. The payment processing agents are entitled to a commission for
processing customer prepayments.



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Maopao Community revenues through K Currency are derived from the purchase of in-game
virtual items having an unlimited life. Such revenues are initially deferred and are subsequently recognized following the historical user retention pattern over the estimated consumption period of the durable virtual items, ranging from one to 12
months. The user retention pattern and consumption period are estimated based on the historical data and log-in patterns of paying users, including the average period paying users typically stay active in the Maopao Community. The Group assesses
these estimates at the end of every reporting period.

Other Revenue

The Group allows mobile service providers and mobile network operators to sell their mobile applications to mobile users through the
Groups Maopao Platform. The Group charges the mobile service providers and mobile network operators a commission based on a percentage of the revenue earned by them. The Group recognizes revenue upon receipt of monthly statements from the
mobile service providers and mobile network operators.

The Group also generates minimal application store revenues from
overseas countries through overseas mobile service providers in the same way disclosed above. The Group recognizes such revenue upon receipt of acknowledgement of successful downloads from these mobile service providers.

Revenues are recorded net of sales discounts to end users.

Cost of revenues

Cost of revenues primarily includes commissions
paid to mobile service providers, mobile network operators, content providers, handset companies and independent payment processing agents. Cost of revenues also includes staff salaries, utilities, depreciation of equipment, and office expenses
directly related to the operation of the Maopao Platform. The Group usually pays content providers a percentage of the proceeds that are derived from their content. For certain applications and content titles, the Group makes a small one-time
payment to the content provider to acquire all associated rights, all of which are recorded as cost of revenues at the time of payment because such applications and content titles usually have short life cycles and the acquisition cost for each
application or content title is relatively low.

Approximately nil, RMB8.3 million and RMB27.3 million accrued costs payable
for content and handset software design were reversed into cost of revenues upon the expiration of the statute of limitations in the fiscal years ended March 31, 2010, 2011 and 2012, respectively. Such accrued costs originated from the
incomplete data provided by mobile network operators prior to March 2010.

Leases

Leases are classified as operating leases unless the terms of the lease transfer substantially all the risks and rewards of ownership to
the lessee, which would be classified as finance leases.

The Group as lessee

Operating lease payments are recognized as expenses on a straight-line basis over the lease term.

Foreign currencies

In preparing the financial statements of each group entity, transactions in currencies other than the functional currency, which is the currency of the primary economic environment in which the entity
operates, of that entity, or foreign currency, are recorded in the entities functional currency at the rates of exchange prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising from the settlement of monetary items, and the retranslation of monetary items and non-monetary items carried at fair value are recognized in profit or loss in the period in
which they arise.

Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.



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Government grants are recognized in profit or loss on a systematic basis over the periods in
which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets
are recognized as deferred revenue in the consolidated statements of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate
financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

Share-based payments

The fair value of services received determined
by reference to the fair value of share options granted at the grant date is expensed on a graded basis over the vesting period with a corresponding increase in equity.

The Group reviews its estimate of the number of options that are expected to ultimately vest. The impact of the revision of the estimates, if any, is recognized in profit or loss, with a corresponding
adjustment to reserves.

At the time when the share options are exercised, the amount previously recognized in reserves will
be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognized in reserve will be transferred to accumulated deficit.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statements of comprehensive income because of items of income or
expense that are taxable or deductible in other years and items that are never taxable or deductible. The Groups liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the
reporting period.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities
in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized
for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if
the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates,
except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences
associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the
reporting period, to recover or settle the carrying amount of its assets and liabilities.

Research and development
expenses

Expenditure on research activities is recognized as an expense in the period in which it is incurred. An
internally-generated intangible asset arising from development, or from the development phase of an internal project, is recognized if all of the following have been demonstrated:



| |  |  | the technical feasibility of completing the intangible asset so that it will be available for use or sale;
| | - |  | ----------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | the intention to complete the intangible asset and use or sell it;
| | - |  | ------------------------------------------------------------------



| |  |  | the ability to use or sell the intangible asset;
| | - |  | ------------------------------------------------



| |  |  | how the intangible asset will generate probable future economic benefits;
| | - |  | -------------------------------------------------------------------------



| |  |  | the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the ability to measure reliably the expenditure attributable to the intangible asset during its development.
| | - |  | ------------------------------------------------------------------------------------------------------------

The amount initially recognized for an internally-generated intangible asset is the sum of the expenditure incurred from the date when
the intangible asset first meets the recognition criteria listed above.

Subsequent to initial recognition, an
internally-generated intangible asset is measured at cost less accumulated amortization and accumulated impairment losses (if any), on the same basis as intangible assets acquired separately.

The Group currently expenses internal and external development costs incurred as all current development costs do not fulfill the above
conditions.

Property and equipment

Property and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is computed on a straight-line basis over the following estimated useful lives:



|                       |  |                                         
|---------------------- |  | ----------------------------------------
|Electronic equipment   |  | 2-10 years                              
|Furniture              |  | 5 years                                 
|Office equipment       |  | 3 years                                 
|Leasehold improvements |  | the shorter of the lease term or 3 years
|Motor vehicles         |  | 5 years                                 

The useful lives of the property and equipment are evaluated annually. An item of property and equipment
is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is included in profit or loss in the period in which the item is
derecognized.

Impairment of tangible assets

The Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indicator exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Recoverable amount is defined as the higher of an assets fair value, less cost
to sell, and its value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its
recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior periods. A reversal of an impairment loss is recognized as income immediately.

Cash and cash equivalents/Term deposits

Cash and cash equivalents include cash on hand and in banks and other short-term highly liquid investments with original maturities of three months or less which are not restricted as to use. Term
deposits represent bank deposits with original maturities of over three months but less than one year when purchased.



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Financial instruments

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities, other than financial assets or financial liabilities at fair value through profit or loss, are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

The Groups financial assets are classified into loans and receivables, financial assets at fair value through profit or loss (FVTPL) and available-for-sale financial assets. The
classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. Loans and receivables, including cash and cash equivalents, term deposits, loan receivable, trade and other receivables and amounts due from related parties, are carried at amortized cost using the effective interest method, less any
identified impairment, unless the effect of discounting is not material, in which case they are carried at cost, less any identified impairment.

A financial asset may be designated as FVTPL upon initial recognition if:



| |  |  | such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a
fair value basis, in accordance with the Groups documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract (asset or liability) to be
designated as FVTPL.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Financial assets at FVTPL are measured at fair value, with changes in fair value
recognized directly in profit or loss. The net gain or loss recognized in profit or loss excludes any dividend or interest earned on the financial assets which is included in other gains and losses in the consolidated statements of comprehensive
income.

Available-for-sale financial assets (AFS financial assets)

As at March 31, 2012, the Groups AFS financial assets are equity investments in two unlisted companies, established in the PRC,
with 5% (RMB800,000) and 1% (RMB100,000) interests in them, respectively.

Dividends on AFS equity instruments are recognized
in profit or loss when the Groups right to receive the dividends is established.

AFS equity investments that do not
have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period.

Impairment of financial assets

Financial assets, other than those at
FVTPL, are assessed for indicators of impairment at the end of the reporting period or when there is objective evidence that an impairment may exist. Financial assets are considered to be impaired where there is objective evidence that, as a result
of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected. Objective evidence of impairment could include:



| |  |  | significant financial difficulty of the issuer or counterparty,
| | - |  | ---------------------------------------------------------------



| |  |  | default or delinquency in interest or principal payments, or
| | - |  | ------------------------------------------------------------



| |  |  | it becoming probable that the borrower will enter bankruptcy or financial reorganization.
| | - |  | -----------------------------------------------------------------------------------------

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are
subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Groups past experience of collecting payments, an increase in the number of delayed payments in the
portfolio past the average credit period of 90 days and observable changes in national or local economic conditions that correlate with default on receivables.



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##### Table of Contents

For financial assets carried at amortized cost, an impairment loss is recognized in profit
or loss and is measured as the difference between the assets carrying amount and the present value of the estimated future cash flows discounted at the financial assets original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of
trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. When a trade receivable is considered uncollectible, it is
written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment
loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortized cost would have been had
the impairment not been recognized.

For financial assets carried at cost, the amount of impairment loss is measured as the
difference between the assets carrying amount and the present value of the estimated future cash flow, discounted at the current market rate of return for similar financial assets. Such impairment loss will not be reversed in subsequent
period.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual
arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any
contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Groups financial liabilities are generally classified into financial liabilities at FVTPL and other financial liabilities.

Effective interest method

Interest expense is recognized on an effective interest basis other than those financial liabilities classified at FVTPL, of which the interest expense is included in change in fair value of financial
liabilities designated at FVTPL.

The effective interest method is a method of calculating the amortized cost of a financial
asset or financial liability and of allocating interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the
financial asset or liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Financial
liabilities at FVTPL

Financial liabilities at FVTPL are comprised of convertible redeemable preferred shares and warrants,
which are measured at fair value, with changes in fair value recognized directly in profit or loss.

Convertible redeemable
preferred shares are redeemable and convertible into common shares at the option of the holder or automatically upon an initial public offering (see note 20). The conversion option that will be settled other than by the exchange of a fixed
amount of cash or another financial asset for a fixed number of the Companys own equity instruments are considered as embedded derivatives not closely related to the host contract. The Group has elected to designate its convertible redeemable
preferred shares with embedded derivatives as financial liabilities at FVTPL on initial recognition as the convertible redeemable preferred shares contain one or more embedded derivatives.

Other financial liabilities

Other financial liabilities, including trade
and other payables and amounts due to related parties, are subsequently measured at amortized cost, using the effective interest method unless the effect of discounting is not material, in which case, they are carried at cost.

Derecognition

The Group
derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On
derecognition of a financial asset in its entirety, the difference between the assets carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive
income is recognized in profit or loss.



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##### Table of Contents

Financial liabilities are derecognized when the obligation is discharged, cancelled or
expires. The difference between the carrying amount of the financial liability derecognized and the consideration paid is recognized in profit or loss.

Translation into United States Dollars

The financial statements of
the Group are stated in RMB. Translations of amounts from RMB into U.S. dollars are solely for the convenience of the reader and were calculated at the rate of US$1.00 = RMB6.2975, on March 30, 2012, as set forth in the H.10 statistical
release of the Federal Reserve Board. The translation is not intended to imply that the RMB amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on March 30, 2012, or at any other rate.



|3. | APPLICATION OF NEW INTERNATIONAL FINANCIAL REPORTING STANDARDS
|-- | --------------------------------------------------------------

In the current year, the Group has applied the following new and revised standards, amendments and interpretations issued by the IASB.



|                       |  |                                                            
|---------------------- |  | -----------------------------------------------------------
|Amendments to IFRSs    |  | Improvements to IFRSs issued in 2010                       
|IAS 24 (Revised 2009)  |  | Related Party Disclosures                                  
|Amendments to IAS 32   |  | Classifications of Rights Issues                           
|Amendments to IFRIC 14 |  | Prepayments of a Minimum Funding Requirement               
|IFRIC 19               |  | Extinguishing Financial Liabilities with Equity Instruments

The application of the new and revised standards, amendments and interpretations in the year ended
March 31, 2012 did not have a material effect on the amounts reported in these consolidated financial statements and/or disclosures set out in these consolidated financial statements.

The Group has not early adopted the following new and revised standards, amendments or interpretations that have been issued but are not
yet effective.

In November 2009, the IASB issued IFRS 9, Financial Instruments, as the first step in its project
to replace IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 introduces new requirements for the classification and measurement of financial assets and requires all recognized financial assets that are within the scope
of IAS 39 to be measured at either amortized cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual cash flows that
are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost. All other debt investments and equity investments are measured at fair value. IFRS 9 will be effective from January 1, 2015,
with earlier application permitted.

In October 2010, the IASB issued amendments to IFRS 9 Financial
Instruments. The amendments address the accounting for financial liabilities, specifically volatility in the income statement arising from measuring debt at fair value. With the new requirements, an entity choosing to measure a liability at
fair value will present the portion of the change in its fair value due to changes in the entitys own credit risk in the other comprehensive income section of the income statement, rather than within profit or loss. IFRS 9 is effective for
financial statements in annual periods beginning on or after January 1, 2015. Early adoption of the amendments is permitted; however, entities that elect early adoption must also apply the financial asset requirements in IFRS 9.

The Group anticipates that the adoption of IFRS 9 in the future may have an impact on amounts reported in respect of the Groups
classification and measurement of available-for-sale investments that are measured at cost less impairment at the end of the reporting period. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has
been completed. Currently, the Group does not have financial liabilities designated as FVTPL and, accordingly, IFRS 9 is not expected to have an impact on the Groups financial liabilities.

In May 2011, the IASB issued IFRS 10, Consolidated Financial Statements, which is a replacement of IAS 27,
Consolidated and Separate Financial Statements, and SIC-12, Consolidation  Special Purpose Entities. Concurrent with the issuances of IFRS 10, the IASB also issued IFRS 11 Joint Ventures, IFRS 12
Disclosures of Interests in Other Entities, IAS 27 Separate Financial Statements (revised 2011) and IAS 28 Investment in Associates and Joint Ventures (revised 2011). IFRS 10 includes a new definition of control
that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the
investors returns.



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In May 2011, the IASB issued IFRS 12, Disclosure of Interests in Other
Entities, which requires extensive disclosures relating to an entitys interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. An entity is required to disclose information that users of its
financial statements evaluate the nature of and risk associated with its interests in other entities and the effect of those interests on its financial statements.

These five standards are effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted provided that all of these five standards are applied early at the same
time.

The Group anticipates that these five standards will be adopted in the Groups consolidated financial statements
for the annual period beginning April 1, 2013. However, the Group has not yet performed a detailed analysis of the impact of the application of these Standards and hence has not yet quantified the extent of the impact.

In May 2011, the IASB issued IFRS 13, Fair Value Measurement, which establishes a single source of guidance of fair
value measurement under IFRSs. IFRS 13 defines fair values, provides guidance on its determination and introduces consistent requirements for disclosure on fair value measurement. This standard applies to both financial and non-financial items
measured at fair value. IFRS 13 is effective for annual periods beginning on or after January 1, 2013, with early adoption permitted. The Group is currently evaluating the impact of adoption on its consolidated financial statements.



|4. | CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
|-- | ------------------------------------------------------------------------

In the application of the Groups accounting policies, which are described in note 2, the Company is required to make judgments, estimates and assumptions about the carrying amounts of assets
and liabilities that are not readily apparent from other sources. The estimates and assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period
in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgments in applying the entitys accounting policies

The following are the critical judgments that the directors have made in the process of applying the entitys accounting policies and
that have the most significant effect in the amounts recognized in financial statements.

Contractual arrangements with SPEs

The Group believes that its contractual arrangements with Sky, Mijia, Fanyi, Feineng and Sky Investment are in compliance
with PRC law and are legally enforceable. The shareholders of the consolidated SPEs are also shareholders or senior managements of the Group and therefore the Group believes that they have no current interest in seeking to act contrary to the
contractual arrangements. However, the consolidated SPEs and their shareholders may fail to take certain actions required for the Groups business or to follow the Groups instructions despite their contractual obligations to do so.
Furthermore, if the SPEs or their shareholders do not act in the best interests of the Group under the contractual arrangements and any dispute relating to these contractual arrangements remains unresolved, the Group will have to enforce its rights
under these contractual arrangements through the operations of PRC law and courts and therefore will be subject to uncertainties in the PRC legal system. All of these contractual arrangements are governed by PRC law and provide for the resolution of
disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. As a result, uncertainties in the PRC legal system
could limit the Groups ability to enforce these contractual arrangements, which may make it difficult to exert effective control over the Groups consolidated SPEs, and its ability to conduct the Groups business may be adversely
affected.



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Key sources of estimation uncertainty

Following are the key assumptions and other key sources of estimation uncertainty at the end of the reporting period that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Maopao
Community Revenues through K Currency

Maopao Community revenues through K Currency are derived from the purchase of
in-game virtual items having an unlimited life. Such revenues are initially deferred and are subsequently recognized following the historical user retention pattern over the estimated consumption period of the durable virtual items, ranging from one
to 12 months. The user retention pattern and consumption period are estimated based on the historical data and log-in patterns of paying users, including the average period paying users typically stay active in the Maopao Community. Future paying
user usage patterns and behavior may differ from the historical usage patterns and therefore the estimated average playing periods are assessed at the end of every reporting period and may change in the future.

Recognition of deferred tax assets

As at March 31, 2010, 2011 and 2012, the carrying amount of deferred tax assets of the Group are approximately RMB4,447,000, RMB6,656,000 and RMB2,210,000, respectively. No deferred tax asset has
been recognized in respect of tax losses of RMB1,187,000, RMB29,663,000 and RMB37,998,000 as at March 31, 2010, 2011 and 2012 due to the unpredictability of future profit streams. The recognition of deferred tax assets is based upon whether it
is more likely than not that sufficient taxable profit will be available in the future, against which the reversal of temporary differences can be deducted. Recognition, therefore, involves judgment regarding the future financial performance of the
particular legal entity or tax group in which the deferred tax asset has been recognized. In cases where the actual future profits generated are less or more than expected, a material reversal or recognition of deferred tax assets may arise, which
would be recognized in profit or loss for the period in which such a reversal or recognition takes place.

Fair value of convertible
redeemable preferred shares and warrants

The convertible redeemable preferred shares and warrants, which were outstanding
at March 31, 2010 and up to the Companys IPO in December 2010, did not have a quoted price in an active market. Determining the fair value of common shares and convertible redeemable preferred shares required making complex and subjective
judgments regarding projected financial and operating results, the unique business risks, the liquidity of the common shares and the operating history and prospects at the time of issuance. Therefore, these fair values were inherently uncertain and
highly subjective.

The Black-Scholes option pricing model was used in the valuation of the warrants. In calculating the fair
value of the warrants, the Group used multiple inputs, including the fair value of the preferred shares, warrant exercise price, expected life, risk-free rate, dividend yield and expected volatility. Changes to these estimates and assumptions could
result in significant change in the fair value of the convertible redeemable preferred shares and warrants.

Share-based compensation

The Group records share-based compensation based on the grant date fair value of the option awards which is computed using
the Black-Scholes option pricing model. The Black-Scholes model requires the input of highly subjective assumptions including the expected stock price volatility, expected option terms, risk-free interest rate and dividend yield. Management also
estimates and reviews the forfeiture rates periodically, which may also affect the expense recognized in profit or loss.



|5. | FINANCIAL INSTRUMENTS
|-- | ---------------------

Capital risk management

The primary objective of the Groups capital management is to safeguard the Groups ability to continue as a going concern, so that it can provide an adequate return to shareholders by pricing
its services commensurately with the level of risk. The Groups overall strategy remains unchanged during the reporting periods.

The capital structure of the Group consists of convertible redeemable preferred shares, cash and cash equivalents and equity, which includes share capital and reserves.



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##### Table of Contents

The Group reviews the capital structure regularly and considers the cost of capital and the
risks associated with each class of capital and, to the extent necessary, balances its overall capital structure through the payment of dividends and issuance of new shares.

Categories of financial instruments

The carrying amounts of
financial assets and financial liabilities are as follows:



|                                                |  |              |         |  |         |  |         |         |  |  |         | 
|----------------------------------------------- |  | ------------ | ------- |  | ------- |  | ------- | ------- |  |  | ------- | 
|                                                |  | At March 31, |        
|                                                |  | 2010         |         |  | 2011    |  |         | 2012    | 
|                                                |  | RMB000      |         |  | RMB000 |  |         | RMB000 | 
|                                                |  |              |        
|Financial assets                                |  |              |         |  |         |  |         |         |  |  |         | 
|Amortized cost                                  |  |              | 226,549 |  |         |  | 604,083 |         |  |  | 673,046 | 
|                                                |  |              |         |  |         |  |         |         |  |  |         | 
|Available-for-sale investments                  |  |              |        |  |         |  |        |         |  |  | 900     | 
|                                                |  |              |         |  |         |  |         |         |  |  |         | 
|                                                |  |              |        
|FVTPL                                           |  |              |         |  |         |  |         |         |  |  |         | 
|Investment at fair value through profit or loss |  |              | 15,442  |  |         |  |        |         |  |  |        | 
|                                                |  |              |         |  |         |  |         |         |  |  |         | 
|                                                |  |              |        
|Financial liabilities                           |  |              |         |  |         |  |         |         |  |  |         | 
|Amortized cost                                  |  |              | 52,138  |  |         |  | 69,386  |         |  |  | 76,905  | 
|                                                |  |              |         |  |         |  |         |         |  |  |         | 
|                                                |  |              |        
|FVTPL                                           |  |              |         |  |         |  |         |         |  |  |         | 
|Convertible redeemable preferred shares         |  |              | 451,491 |  |         |  |        |         |  |  |        | 
|Warrants                                        |  |              | 27,188  |  |         |  |        |         |  |  |        | 
|                                                |  |              |         |  |         |  |         |         |  |  |         | 
|                                                |  |              | 478,679 |  |         |  |        |         |  |  |        | 
|                                                |  |              |         |  |         |  |         |         |  |  |         | 

Financial risk management objectives and policies

Foreign currency risk management

The Group mainly operates in the PRC with most of its transactions settled in RMB. The foreign currency risk is mainly attributable to the Groups U.S. dollar (US$) bank account
balances and US$ denominated convertible redeemable preferred shares which are subject to redemption at the greater of the purchase price or the fair value of the preferred shares on or after August 2, 2011. The carrying amount of the US$ bank
account balances was approximately RMB2,812,000 and RMB74,789,000 and RMB89,465,000 as of March 31, 2010, 2011 and 2012, respectively. The carrying amount of the convertible redeemable preferred shares were RMB451,491,000, nil and nil as of
March 31, 2010, 2011 and 2012, respectively. The Group has not used any forward contracts, currency borrowings or other means to hedge its foreign currency risk exposure.

If the RMB exchange rate against the US$ had strengthened or weakened by 5% with all other variables held constant, the carrying value of bank accounts denominated in US$ would have decreased or increased
by RMB141,000, RMB3,739,000 and RMB4,473,000 as of March 31, 2010, 2011 and 2012, respectively, with a corresponding decrease or increase in net income (loss) for the respective years. If the RMB exchange rate against the US$ had strengthened
or weakened by 5%, with all other variables held constant, the carrying value of the convertible redeemable preferred shares, denominated in US$, would have decreased or increased by RMB22,575,000 as of March 31, 2010 with a corresponding
decrease in net loss for the respective year. The sensitivity analysis only details the Groups sensitivity to a 5% appreciation and depreciation in the foreign currency, US$, against RMB. The 5% figure is the sensitivity rate used when
reporting foreign currency risk internally to key management personnel and represents managements assessment of the reasonably possible change in foreign exchange rate.

Interest rate risk management

The Group has exposure to cash flow
interest rate risk due to the fluctuation of the variable interest rates associated with its cash and cash equivalents and loan receivable which are based on prevailing market interest rates. Currently, the Group does not have a specific policy to
manage their interest rate risk. The Group does not have significant exposure to cash flow interest rate risk as at March 31, 2010, 2011 and 2012 as the interest rates have not fluctuated significantly in recent years.



F-20



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##### Table of Contents

Credit risk management

The Groups maximum exposure to credit risks is equivalent to the total carrying amount of loan receivable, trade and other
receivables, amounts due from related parties, cash and cash equivalents, term deposits, available-for-sale investments and investments at FVTPL of RMB241,991,000, RMB604,083,000 and RMB673,946,000 as of March 31, 2010, 2011 and 2012,
respectively.

Collection of the Groups revenues is substantially done through mobile service providers with whom the
Group has co-operative service agreements. The total carrying amount of trade receivables from mobile service providers was RMB71,774,000, RMB81,398,000 and RMB81,681,000, respectively, as of March 31, 2010, 2011 and 2012. The Group also had
RMB7,157,000 trade receivables from mobile service operators as of March 31, 2012 and the credit risk of these receivables were very low. In order to minimize the credit risk of trade receivables from mobile service providers, the Group
assesses the credit worthiness of the mobile service providers prior to contracting with them. In addition, the Group allocates revenue payments among mobile service providers based on their payment history and the assessment of their relationship
with the wireless carriers which will impact the mobile service providers ability to pay. The Group further monitors the subsequent performance of the mobile service providers in order to mitigate collection risk going forward. In addition,
the Group reviews the recoverable amount of each individual trade receivable at the end of each reporting period to determine if provision should be made for uncollectible amounts.

The Group has concentration of credit risks with exposure limited to certain mobile service providers and mobile network operators. As at
March 31, 2010, 2011 and 2012, ten mobile service providers or mobile network operators accounted for approximately RMB61,803,000, RMB53,253,000 and RMB64,812,000, or 86%, 65% and 73% of the Groups trade receivables, respectively. The
Group closely monitors the subsequent settlement of trade receivables and does not grant long credit periods to the counterparties.

The Groups cash and cash equivalents and term deposits are held by large banks established in the PRC and Hong Kong Special Administrative Region. In addition, the Groups investment at FVTPL
was also with a large bank in the PRC. The Group does not expect any losses arising from non-performance of these financial institutions.

Liquidity risk

The Group monitors and attempts to maintain a level
of cash and cash equivalents adequate to finance the Groups operations and mitigate the effects of fluctuations in cash flows.

The following tables present the maturities of the Groups financial liabilities based upon the undiscounted cash flows of financial liabilities assuming payment on the earliest date on which the
Group can be required to pay. The table includes both interest, if any, and principal cash flows.



|                                        |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|--------------------------------------- |  | ---------------------------- | ------ |  | --------- |  | - | ----------------- |  |  | ----------- |  |  | ---------------------------------------------- | ------- |  |  |  | ------- | 
|                                        |  | On demand orless than1 month |        |  | 1-3months |  |   | 3 monthsto 1 year |  |  | over 1 year |  |  | Total undiscountedcash flow andcarrying amount |        
|                                        |  | RMB000                      |        |  | RMB000   |  |   | RMB000           |  |  | RMB000     |  |  | RMB000                                        |        
|                                        |  |                              |        |  |          
|March 31, 2010                          |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|Trade and other payables                |  |                              | 46,001 |  |           |  |  |                   |  |  |            |  |  |                                                |        |  |  |  | 46,001  | 
|Amounts due to related parties          |  |                              | 6,137  |  |           |  |  |                   |  |  |            |  |  |                                                |        |  |  |  | 6,137   | 
|Convertible redeemable preferred shares |  |                              |       |  |           |  |  |                   |  |  |            |  |  |                                                | 451,491 |  |  |  | 451,491 | 
|                                        |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|                                        |  |                              | 52,138 |  |           |  |  |                   |  |  |            |  |  |                                                | 451,491 |  |  |  | 503,629 | 
|                                        |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|March 31, 2011                          |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|Trade and other payables                |  |                              | 68,491 |  |           |  |  |                   |  |  |            |  |  |                                                |        |  |  |  | 68,491  | 
|Amounts due to related parties          |  |                              | 895    |  |           |  |  |                   |  |  |            |  |  |                                                |        |  |  |  | 895     | 
|                                        |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|                                        |  |                              | 69,386 |  |           |  |  |                   |  |  |            |  |  |                                                |        |  |  |  | 69,386  | 
|                                        |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|March 31, 2012                          |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|Trade and other payables                |  |                              | 76,034 |  |           |  |  |                   |  |  |            |  |  |                                                |        |  |  |  | 76,034  | 
|Amounts due to related parties          |  |                              | 871    |  |           |  |  |                   |  |  |            |  |  |                                                |        |  |  |  | 871     | 
|                                        |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 
|                                        |  |                              | 76,905 |  |           |  |  |                   |  |  |            |  |  |                                                |        |  |  |  | 76,905  | 
|                                        |  |                              |        |  |           |  |   |                   |  |  |             |  |  |                                                |         |  |  |  |         | 



F-21



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##### Table of Contents

Fair value

Convertible redeemable preferred shares (Series A Shares) and common shares

The Group used generally accepted valuation methodologies, including the discounted cash flow approach and the guideline companys
approach, which incorporates certain assumptions including the market performance of comparable listed companies, projected financial results and growth trends of the Company, weighted average cost of capital (WACC), terminal growth rate
to derive the total equity value of the Company.

The fair value of the convertible redeemable preferred shares as of
March 31, 2010 was determined using an option pricing model. The residual value was then allocated to the common shares. The option pricing model considered the convertible redeemable preferred shares as call options on the Companys
equity value, with strike prices based on the liquidation preference of the convertible redeemable preferred shares. The main inputs to this model included equity value of the Company, probability of occurrence of a redemption, Qualified Initial
Public Offering (QIPO) or liquidation event, expected volatility, expected time to expiration and risk free interest rate. Since issuance, the probability of occurrence of a redemption or Initial Public Offering (IPO) event
has increased with a corresponding decrease in the probability of a liquidation event occurring. The expected option life was determined as the time between the valuation date and the redemption date. The risk free interest rate was based on the
yield of U.S. treasury bond with a duration approximating the expected time to expiration of the option. Volatility was based on the daily trading price of comparable companies for a period corresponding to the expected term of the option. The
fair value of the convertible redeemable preferred shares at the date before conversion was determined by reference to the offering price of the Company.

The Company used a WACC of 19% as of March 31, 2010. If WACC was 1% higher, assuming all the other variables were held constant, the fair value of the Series A Shares would decrease by
approximately RMB27,083,000 as at March 31, 2010.

Upon completion of the IPO in December 2010, the Series A Shares were
converted into common shares.

Warrants

The Black-Scholes option pricing model was used in the valuation of the warrants. In calculating the fair value of the warrants, the Group used multiple inputs, including the fair value of the preferred
shares, warrant exercise price, expected life, risk free rate, dividend yield and expected volatility. The following assumptions were used to estimate the fair value of the warrants:



|                    |  |              |      |   |                              |  |      |  
|------------------- |  | ------------ | ---- | - | ---------------------------- |  | ---- | -
|                    |  | At March 31, |      |   |                              | 
|                    |  | 2010         |      |   | at the timebefore conversion | 
|Risk free rate      |  |              | 0.3  | % |                              |  | 0.1  | %
|Dividend yield      |  |              | 0    | % |                              |  | 0    | %
|Expected term       |  |              | 0.59 |   |                              |  | 0.21 |  
|Expected volatility |  |              | 61   | % |                              |  | 51   | %

The risk free rate was based on the yield to maturity of US treasury bond yield curve as of the valuation
date, while the expected volatility was calculated based on the daily trading price of comparable companies for a period corresponding to the expected term of the warrants.

Warrants were exercised upon completion of the IPO in December 2010.

Investment at FVTPL

The fair value of the investment at FVTPL was derived from discounted cash flows based on the terms of the contract and certain inputs, such as forward and spot exchange rates of US$ and Euro and interest
rates.

The carrying amounts of all other financial assets and financial liabilities are recorded at amortized cost, using the
effective interest method unless the effect of discounting is not material, in which case, they are carried at cost. Such amounts approximate their fair value.

Fair value measurement recognized in the statements of financial position

Financial instrument that are measured at fair value are grouped into Levels 1 to 3 based on the degree to which the fair value is
observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities.



F-22



---

##### Table of Contents

Level 2 fair value measurements are those derived from inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The convertible redeemable preferred shares and warrants of the Group were measured at fair value as at March 31, 2011
and were categorized as Level 3 based on the degree to which the fair value is observable. There were no transfers between Level 1 and 2 in the period presented. A reconciliation from the beginning balance to the ending balance of
Level 3 fair value measurements of financial liabilities is presented in Note 20.

In addition, the investment at FVTPL
was also measured at fair value at the end of each reporting period and is categorized as Level 3. A reconciliation of Level 3 fair value measurements of financial assets is as follows:



|                                      |  |             |         |  
|------------------------------------- |  | ----------- | ------- | -
|                                      |  | Investments |        
|                                      |  | RMB000     |        
|                                      | 
|At April 1, 2010                      |  |             | 15,442  |  
|Total gain included in profit or loss |  |             | 404     |  
|Redemption                            |  |             | (15,846 | )
|                                      |  |             |         |  
|                                      | 
|At March 31, 2011 and 2012            |  |             |        |  
|                                      |  |             |         |  



|6. | REVENUES AND SEGMENT INFORMATION
|-- | --------------------------------



|                                             |  |                       |         |  |         |  |         |         |  |  |         | 
|-------------------------------------------- |  | --------------------- | ------- |  | ------- |  | ------- | ------- |  |  | ------- | 
|                                             |  | Years Ended March 31, |        
|                                             |  | 2010                  |         |  | 2011    |  |         | 2012    | 
|                                             |  | RMB000               |         |  | RMB000 |  |         | RMB000 | 
|Application store revenues                   |  |                       | 515,768 |  |         |  | 598,782 |         |  |  | 546,117 | 
|Maopao Community revenues through K currency |  |                       | 3,578   |  |         |  | 60,050  |         |  |  | 110,536 | 
|Other revenues                               |  |                       | 24,912  |  |         |  | 16,462  |         |  |  | 28,910  | 
|                                             |  |                       |         |  |         |  |         |         |  |  |         | 
|Total                                        |  |                       | 544,258 |  |         |  | 675,294 |         |  |  | 685,563 | 
|                                             |  |                       |         |  |         |  |         |         |  |  |         | 

Segment information

The Group operates and manages its business as a single segment. The Groups chief operating decision maker has been identified as the Chief Executive Officer, who reviews the revenue analysis by
application store revenues, Maopao Community revenue through K currency and other revenues and the profit from operation of the Group as a whole when making decisions about allocating resources and assessing performance of the Group.

Geographical information

All of the Groups non-current assets are located in the PRC. Revenues are primarily derived from the PRC, with minimal revenues derived from Indonesia and other countries. The following table sets
forth revenues by geographic area:



|        |  |                       |         |  |         |  |         |         |  |  |         | 
|------- |  | --------------------- | ------- |  | ------- |  | ------- | ------- |  |  | ------- | 
|        |  | Years Ended March 31, |        
|        |  | 2010                  |         |  | 2011    |  |         | 2012    | 
|        |  | RMB000               |         |  | RMB000 |  |         | RMB000 | 
|        |  |                       |        
|PRC     |  |                       | 544,258 |  |         |  | 672,649 |         |  |  | 672,195 | 
|Non-PRC |  |                       |        |  |         |  | 2,645   |         |  |  | 13,368  | 
|        |  |                       |         |  |         |  |         |         |  |  |         | 
|Total   |  |                       | 544,258 |  |         |  | 675,294 |         |  |  | 685,563 | 
|        |  |                       |         |  |         |  |         |         |  |  |         | 

Information about major customers

During the three years ended March 31, 2010, 2011 and 2012, there was no customer that individually accounted for over 10% of the Groups total revenue.



F-23



---

##### Table of Contents

|7. | OTHER OPERATING INCOME, NET
|-- | ---------------------------



|                                      |  |                       |   |  |         |  |   |         |  |  |       |  
|------------------------------------- |  | --------------------- | - |  | ------- |  | - | ------- |  |  | ----- | -
|                                      |  | Years Ended March 31, |  
|                                      |  | 2010                  |   |  | 2011    |  |   | 2012    | 
|                                      |  | RMB000               |   |  | RMB000 |  |   | RMB000 | 
|                                      |  |                       |  
|Government grant                      |  |                       |  |  |         |  |  |         |  |  | 2,091 |  
|Gain on derecognition of a subsidiary |  |                       |  |  |         |  |  |         |  |  | 1,930 |  
|Others                                |  |                       |  |  |         |  |  |         |  |  | (346  | )
|                                      |  |                       |   |  |         |  |   |         |  |  |       |  
|Total                                 |  |                       |  |  |         |  |  |         |  |  | 3,675 |  
|                                      |  |                       |   |  |         |  |   |         |  |  |       |  



|8. | OTHER GAINS AND LOSSES
|-- | ----------------------



|                                            |  |                       |       |  |         |  |        |         |  |  |        |  
|------------------------------------------- |  | --------------------- | ----- |  | ------- |  | ------ | ------- |  |  | ------ | -
|                                            |  | Years Ended March 31, |      
|                                            |  | 2010                  |       |  | 2011    |  |        | 2012    | 
|                                            |  | RMB000               |       |  | RMB000 |  |        | RMB000 | 
|                                            |  |                       |      
|Interest income                             |  |                       | 1,060 |  |         |  | 2,726  |         |  |  | 12,110 |  
|Change in fair value of investment at FVTPL |  |                       | 442   |  |         |  | 404    |         |  |  |       |  
|Income on loan receivable                   |  |                       | 1,148 |  |         |  | 193    |         |  |  | 450    |  
|Exchange gain (loss)                        |  |                       | 250   |  |         |  | 7,941  |         |  |  | (3,266 | )
|Others                                      |  |                       | 631   |  |         |  | (85    | )       |  |  | 2,355  |  
|                                            |  |                       |       |  |         |  |        |         |  |  |        |  
|Total                                       |  |                       | 3,531 |  |         |  | 11,179 |         |  |  | 11,649 |  
|                                            |  |                       |       |  |         |  |        |         |  |  |        |  



|9. | PROFIT (LOSS) BEFORE TAX
|-- | ------------------------



|                                                             |  |                       |        |  |         |  |         |         |  |  |         | 
|------------------------------------------------------------ |  | --------------------- | ------ |  | ------- |  | ------- | ------- |  |  | ------- | 
|                                                             |  | Years Ended March 31, |       
|                                                             |  | 2010                  |        |  | 2011    |  |         | 2012    | 
|                                                             |  | RMB000               |        |  | RMB000 |  |         | RMB000 | 
|                                                             |  |                       |       
|Profit (loss) before tax has been arrived at after charging: |  |                       |        |  |         |  |         |         |  |  |         | 
|Staff salary and other benefits                              |  |                       | 48,739 |  |         |  | 96,882  |         |  |  | 112,416 | 
|Retirement benefit scheme contributions                      |  |                       | 892    |  |         |  | 1,511   |         |  |  | 1,843   | 
|Share-based compensation (Note 22)                           |  |                       | 3,606  |  |         |  | 50,290  |         |  |  | 45,683  | 
|                                                             |  |                       |        |  |         |  |         |         |  |  |         | 
|Total staff costs                                            |  |                       | 53,237 |  |         |  | 148,683 |         |  |  | 159,942 | 
|                                                             |  |                       |        |  |         |  |         |         |  |  |         | 
|Depreciation of property and equipment                       |  |                       | 2,452  |  |         |  | 15,601  |         |  |  | 21,082  | 
|Loss on disposal of property and equipment                   |  |                       | 56     |  |         |  | 44      |         |  |  |        | 
|Operating lease rentals in respect of rented premises        |  |                       | 3,106  |  |         |  | 8,325   |         |  |  | 8,582   | 
|Bad debt written off                                         |  |                       |       |  |         |  | 2,041   |         |  |  | 2,361   | 



|10. | INCOME TAX
|--- | ----------

Cayman
Islands

Under the current laws of the Cayman Islands, the Company is not subject to income tax.

PRC

On January 1, 2008, a new Enterprise Income Tax Law (the New EIT Law) in China took effect. The New EIT Law applies a uniform 25% enterprise income tax rate to both foreign invested and
domestic enterprises.



F-24



---

##### Table of Contents

In 2007, Sky was granted the status of Software Enterprise under the PRC tax laws that
entitled it to a preferential EIT rate of two-year EIT exemption from its first year of profitable operation, after offsetting prior years tax losses, and a 50% reduction of its applicable EIT rate for the succeeding three years. On
April 24, 2009, the PRC government promulgated the Notice on Several Issues Relevant to the Implementation of the Preferential Policies on EIT which allows Software Enterprises to continue to enjoy their unexpired tax holiday under the old EIT
Law. The first profit-making year of Sky was 2008. As a result, Sky was subject to a tax rate of 12.5% for calendar year 2010, 2011 and 2012.

In 2009, Mijia was granted the status of Software Enterprise under the PRC tax laws that entitled it to a preferential EIT rate of two-year EIT exemption from its first year of profitable operation, after
offsetting prior years tax losses, and a 50% reduction of its applicable EIT rate for the succeeding three years. The first profit-making year of Mijia was 2010. As a result, Mijias EIT rates are 0%, 0%, 12.5% for calendar year 2010,
2011 and 2012, respectively.



|                              |  |                       |       |  |         |  |         |         |  |  |       |  
|----------------------------- |  | --------------------- | ----- |  | ------- |  | ------- | ------- |  |  | ----- | -
|                              |  | Years Ended March 31, |      
|                              |  | 2010                  |       |  | 2011    |  |         | 2012    | 
|                              |  | RMB000               |       |  | RMB000 |  |         | RMB000 | 
|Current tax expense:          |  |                       |       |  |         |  |         |         |  |  |       |  
|PRC enterprise income tax     |  |                       | 3,481 |  |         |  | 5,147   |         |  |  |      |  
|Over provision in prior years |  |                       |      |  |         |  |        |         |  |  | (844  | )
|Deferred tax                  |  |                       | 5,047 |  |         |  | (10,514 | )       |  |  | 4,446 |  
|                              |  |                       |       |  |         |  |         |         |  |  |       |  
|Total                         |  |                       | 8,528 |  |         |  | (5,367  | )       |  |  | 3,602 |  
|                              |  |                       |       |  |         |  |         |         |  |  |       |  

The tax expense (credit) can be reconciled to the profit (loss) per the consolidated statements of
comprehensive income as follows:



|                                                                                                                                     |  |                       |          |   |         |  |         |         |  |  |         |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------- | -------- | - | ------- |  | ------- | ------- |  |  | ------- | -
|                                                                                                                                     |  | Years Ended March 31, |         
|                                                                                                                                     |  | 2010                  |          |   | 2011    |  |         | 2012    | 
|                                                                                                                                     |  | RMB000               |          |   | RMB000 |  |         | RMB000 | 
|Profit (loss) before tax                                                                                                             |  |                       | (221,274 | ) |         |  | 130,194 |         |  |  | 36,531  |  
|                                                                                                                                     |  |                       |          |   |         |  |         |         |  |  |         |  
|Income tax expense at PRC tax rate of 25% (i)                                                                                        |  |                       | (55,319  | ) |         |  | 32,549  |         |  |  | 9,133   |  
|Tax effect of:                                                                                                                       |  |                       |          |   |         |  |         |         |  |  |         |  
|Loss (gain) on changes in fair value of convertible redeemable preferred shares and warrants that are not deductible for tax
purpose |  |                       | 74,357   |   |         |  | (31,575 | )       |  |  |        |  
|Loss on modification of convertible redeemable preferred shares                                                                      |  |                       | 11,110   |   |         |  |        |         |  |  |        |  
|Non-deductible share-based compensation                                                                                              |  |                       | 902      |   |         |  | 12,573  |         |  |  | 11,421  |  
|Non-deductible finance cost                                                                                                          |  |                       | 1,354    |   |         |  | 1,083   |         |  |  |        |  
|Other non-deductible expenses                                                                                                        |  |                       | 1,029    |   |         |  | 4,296   |         |  |  | 1,640   |  
|Tax incentives relating to R&D expenditures                                                                                          |  |                       |         |   |         |  | (2,789  | )       |  |  | (2,898  | )
|Tax exemption and concession to PRC subsidiaries                                                                                     |  |                       | (33,141  | ) |         |  | (23,236 | )       |  |  | (14,897 | )
|Tax effect of deferred tax assets not recognized from deductible temporary differences                                               |  |                       |         |   |         |  | 2,621   |         |  |  | (2,037  | )
|Tax effect of tax loss not recognized                                                                                                |  |                       |         |   |         |  | 7,416   |         |  |  | 2,084   |  
|Withholding income tax provision on dividend from PRC subsidiaries                                                                   |  |                       | 8,305    |   |         |  | (8,305  | )       |  |  |        |  
|Others                                                                                                                               |  |                       | (69      | ) |         |  |        |         |  |  | (844    | )
|                                                                                                                                     |  |                       |          |   |         |  |         |         |  |  |         |  
|Tax expense (credit) for the year                                                                                                    |  |                       | 8,528    |   |         |  | (5,367  | )       |  |  | 3,602   |  
|                                                                                                                                     |  |                       |          |   |         |  |         |         |  |  |         |  



|(i) | The applicable PRC statutory income tax rate is used since the Groups taxable income is generated in the PRC. The applicable PRC income tax rate of 25% was used
in the above computation for all reporting periods.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of March 31, 2010, 2011 and 2012, the Group has
unused tax losses of RMB1,189,000, RMB29,663,000 and RMB37,998,000 available for offset against future profits that may be carried forward until calendar year 2016. No deferred tax asset has been recognized in respect of the tax losses due to the
unpredictability of future profit streams.



F-25



---

##### Table of Contents

The following table reflects the movements in deferred tax assets (liabilities):



|                                                  |  |                                         |        |   |                 |  |        |            |  |  |         |   |  |  |        |  
|------------------------------------------------- |  | --------------------------------------- | ------ | - | --------------- |  | ------ | ---------- |  |  | ------- | - |  |  | ------ | -
|                                                  |  | Withholding taxon undistributedearnings |        |   | Accruedexpenses |  |        | Tax losses |  |  | Total   |  
|                                                  |  | RMB000                                 |        |   | RMB000         |  |        | RMB000    |  |  | RMB000 |  
|Balance at April 1, 2009                          |  |                                         |       |   |                 |  | 1,032  |            |  |  | 157     |   |  |  | 1,189  |  
|Credit (charge) to profit or loss during the year |  |                                         | (8,305 | ) |                 |  | 3,415  |            |  |  | (157    | ) |  |  | (5,047 | )
|                                                  |  |                                         |        |   |                 |  |        |            |  |  |         |   |  |  |        |  
|Balance at March 31, 2010                         |  |                                         | (8,305 | ) |                 |  | 4,447  |            |  |  |        |   |  |  | (3,858 | )
|Credit to profit or loss during the year          |  |                                         | 8,305  |   |                 |  | 2,209  |            |  |  |        |   |  |  | 10,514 |  
|                                                  |  |                                         |        |   |                 |  |        |            |  |  |         |   |  |  |        |  
|Balance at March 31, 2011                         |  |                                         |       |   |                 |  | 6,656  |            |  |  |        |   |  |  | 6,656  |  
|Charge to profit or loss during the year          |  |                                         |       |   |                 |  | (4,446 | )          |  |  |        |   |  |  | (4,446 | )
|                                                  |  |                                         |        |   |                 |  |        |            |  |  |         |   |  |  |        |  
|Balance at March 31, 2012                         |  |                                         |       |   |                 |  | 2,210  |            |  |  |        |   |  |  | 2,210  |  
|                                                  |  |                                         |        |   |                 |  |        |            |  |  |         |   |  |  |        |  

The following is the analysis of the deferred tax balances for financial reporting purposes



|                         |  |              |        |   |         |  |       |         |  |  |       | 
|------------------------ |  | ------------ | ------ | - | ------- |  | ----- | ------- |  |  | ----- | 
|                         |  | At March 31, |       
|                         |  | 2010         |        |   | 2011    |  |       | 2012    | 
|                         |  | RMB000      |        |   | RMB000 |  |       | RMB000 | 
|Deferred tax assets      |  |              | 4,447  |   |         |  | 6,656 |         |  |  | 2,210 | 
|Deferred tax liabilities |  |              | (8,305 | ) |         |  |      |         |  |  |      | 
|                         |  |              |        |   |         |  |       |         |  |  |       | 
|Total                    |  |              | (3,858 | ) |         |  | 6,656 |         |  |  | 2,210 | 
|                         |  |              |        |   |         |  |       |         |  |  |       | 

Under the New EIT Law and implementation rules, PRC withholding income tax at the rate of 10% is
applicable to dividends payable from the profits generated after calendar year 2007 to investors that are non-PRC tax resident enterprises, which do not have an establishment or place of business in the PRC, or which have such
establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such interest or dividends have their sources within the PRC, unless such immediate holding
companys jurisdiction of incorporation has a tax treaty with China that provides for a more favorable withholding arrangement. Therefore, dividends distributed from the subsidiaries to the Company are subject to the withholding tax of 10%, or
a lower treaty rate, if applicable.

The Group declared dividends in March 2010 and May 2010, however, the Group has no plan
to declare dividends in the foreseeable future. There were undistributed earnings of the subsidiaries and consolidated SPEs of approximately RMB125,296,000, RMB204,262,000 and RMB230,009,000 at March 31, 2010, 2011 and 2012, respectively. Other
than deferred tax liability associated with the expected dividend payment of RMB8,305,000 being provided as at March 31, 2010, deferred tax liability has not been provided on the remaining undistributed earnings as the Group is able to control
the timing of the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future.

During the year ended March 31, 2011, the Group paid the aforementioned dividend in a tax-free manner and, therefore, the related deferred tax liability was released to profit and loss.



|11. | EARNINGS (LOSS) PER SHARE
|--- | -------------------------

Holders of the Groups Restricted Shares (Note 22) are entitled to participate in dividends on an equal basis with holders
of the Groups unrestricted common shares. As such dividends are not subject to restriction as to use, the Restricted Shares are considered participating and basic earnings (loss) per share has been computed using the two-class method as
follows:



|                                                                               |  |                       |             |   |      |  |             |      |  |  |             |  
|------------------------------------------------------------------------------ |  | --------------------- | ----------- | - | ---- |  | ----------- | ---- |  |  | ----------- | -
|                                                                               |  | Years Ended March 31, |            
|                                                                               |  | 2010                  |             |   | 2011 |  |             | 2012 | 
|Profit (loss) for the year attributable to the owners of the Company (RMB000) |  |                       | (229,802    | ) |      |  | 136,310     |      |  |  | 32,969      |  
|Less: amount allocated to restricted shares (RMB000)                          |  |                       | 31,917      |   |      |  | (1,032      | )    |  |  | (602        | )
|                                                                               |  |                       |             |   |      |  |             |      |  |  |             |  
|Profit (loss) for the year - basic                                             |  |                       | (197,885    | ) |      |  | 135,278     |      |  |  | 32,367      |  
|Gains on changes in fair value of convertible redeemable preferred shares      |  |                       |            |   |      |  | (106,684    | )    |  |  |            |  
|Finance cost                                                                   |  |                       |            |   |      |  | 4,333       |      |  |  |            |  
|Gains on changes in fair value of warrants                                     |  |                       |            |   |      |  | (7,377      | )    |  |  |            |  
|Foreign exchange gains related to preferred shares and warrants                |  |                       |            |   |      |  | (12,240     | )    |  |  |            |  
|                                                                               |  |                       |             |   |      |  |             |      |  |  |             |  
|Profit (loss) for the year - diluted                                           |  |                       | (197,885    | ) |      |  | 13,310      |      |  |  | 32,367      |  
|                                                                               |  |                       |             |   |      |  |             |      |  |  |             |  
|Weighted average common shares outstanding - basic                             |  |                       | 129,166,600 |   |      |  | 182,010,313 |      |  |  | 257,428,502 |  
|Share options                                                                  |  |                       |            |   |      |  | 324,570     |      |  |  | 841,857     |  
|Convertible redeemable preferred shares                                        |  |                       |            |   |      |  | 35,342,466  |      |  |  |            |  
|Warrants                                                                       |  |                       |            |   |      |  | 2,119,714   |      |  |  |            |  
|                                                                               |  |                       |             |   |      |  |             |      |  |  |             |  
|Weighted average common shares outstanding - diluted                           |  |                       | 129,166,600 |   |      |  | 219,797,063 |      |  |  | 258,270,359 |  
|                                                                               |  |                       |             |   |      |  |             |      |  |  |             |  
|Basic earnings (loss) per share                                                |  |                       | (1.53       | ) |      |  | 0.74        |      |  |  | 0.13        |  
|                                                                               |  |                       |             |   |      |  |             |      |  |  |             |  
|Diluted earnings (loss) per share                                              |  |                       | (1.53       | ) |      |  | 0.06        |      |  |  | 0.13        |  
|                                                                               |  |                       |             |   |      |  |             |      |  |  |             |  



F-26



---

##### Table of Contents

For the year ended March 31, 2010, the computation of diluted loss per share did not
include the potential common shares arising from the companys share option, warrants and convertible redeemable preferred shares, as it would result in a decrease in loss per share.



|12. | DIVIDENDS
|--- | ---------

In March 2010
and May 2010, the Company declared dividends of RMB16,250,000 (RMB0.11 per share) and RMB13,000,000 (RMB0.11 per share) to its common shareholders, respectively. The Company also approved a payment to its preferred shareholders, who had
participating rights, in the amount of RMB5,417,000 and RMB4,333,000 for the year ended March 31, 2010 and 2011, respectively, which was recorded as a finance cost in the consolidated statements of comprehensive income. Such amounts were paid
during the year ended March 31, 2011.



|13. | CASH AND CASH EQUIVALENTS / TERM DEPOSITS
|--- | -----------------------------------------

Cash and cash equivalents of the Group are mainly denominated in RMB and US$. The cash balances carried an average interest rate of 1.17%, 1.17% and 1.20% per annum as of March 31, 2010, 2011
and 2012, respectively.

Term deposits had an average interest rate of 2.25%, 3.30% and 3.30% per annum at March 31,
2010, 2011 and 2012, respectively.



|14. | INVESTMENT AT FVTPL
|--- | -------------------

In
May 2009, the Group invested RMB15,000,000 in a principal-protected deposit with a commercial bank in China having a one-year term expiring in May 2010. The investment guarantees a rate of return ranging from 2.25% to 6%, which varies based on an
exchange rate of US$ against Euro during the contract period. This investment was designated as FVTPL upon initial recognition as the contract contains foreign currency embedded derivative and was stated at fair value at March 31, 2010
(Note 5). The principal and related returns were collected upon the expiration in May 2010.



|15. | LOAN RECEIVABLE
|--- | ---------------

Under
the existing PRC law, loans between legal entities, including both profit and not-for-profit entities, must be arranged through a PRC registered financial institution. As such, in May 2009, the Group entered into a loan agreement with a PRC bank
under which the Group paid a principal amount of RMB25,000,000 to the bank who then loaned the money to the Traffic Bureau of the Province of Heilongjiang, a government agency. The loan has a one-year term expiring in May 2010 with a stated rate of
return equivalent to the current market interest rate for current deposits. The loan principal and rate of return were not guaranteed by the bank. The carrying amount approximates the fair value of the financial asset due to its short term nature
and the variable interest rate. The principal and the related interest were collected upon the expiration of the loan agreement in May 2010.



F-27



---

##### Table of Contents

In December 2011, to achieve higher investment return than the bank term deposits and keep
the principal intact, the Group entered into a loan agreement with another PRC bank under which the Group paid a principal amount of RMB19,550,000 to the bank who then loaned the money to a manufacturing company in Zhejiang province, Zhejiang
Xiehe Group. The loan had a four-month term expiring in March 2012 with a stated interest amount of RMB450,000. The loan principal and interest were guaranteed by the bank. The principal and the related interest were collected upon the
expiration of the loan agreement in March 2012.



|16. | TRADE AND OTHER RECEIVABLES
|--- | ---------------------------



|                               |  |              |        |  |         |  |        |         |  |  |         | 
|------------------------------ |  | ------------ | ------ |  | ------- |  | ------ | ------- |  |  | ------- | 
|                               |  | At March 31, |       
|                               |  | 2010         |        |  | 2011    |  |        | 2012    | 
|                               |  | RMB000      |        |  | RMB000 |  |        | RMB000 | 
|Trade receivables              |  |              | 71,774 |  |         |  | 81,398 |         |  |  | 88,838  | 
|Deposits and other receivables |  |              | 1,101  |  |         |  | 2,264  |         |  |  | 6,609   | 
|Prepayments                    |  |              | 3,235  |  |         |  | 2,519  |         |  |  | 7,925   | 
|                               |  |              |        |  |         |  |        |         |  |  |         | 
|Total                          |  |              | 76,110 |  |         |  | 86,181 |         |  |  | 103,372 | 
|                               |  |              |        |  |         |  |        |         |  |  |         | 

The Group normally grants credit for a period of 90 days to its mobile service providers. The trade
receivables balance past due but not impaired is RMB2,282,000, RMB783,000 and RMB1,910,000 as of March 31, 2010, 2011 and 2012, respectively. The Group has not recognized an allowance for doubtful receivables because there has not been a
significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral or other credit enhancements over these balances. The Group wrote off nil, RMB2,041,000 and RMB2,361,000 in trade and other
receivables during the year ended March 31, 2010, 2011 and 2012 due to mobile network operators unilaterally terminating services provided by certain mobile service providers. The Group does not believe such termination of services provided by
mobile service providers is foreseeable.



|17. | PROPERTY AND EQUIPMENT
|--- | ----------------------



|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|----------------------------- |  | ------------------- | ------- | - | --------- |  | ----- | --------------- |  |  | --------------------- | - |  | ------------- | ------ | - | ------- |  | ---- | - |  |  | ------- | -
|                              |  | Electronicequipment |         |   | Furniture |  |       | Officeequipment |  |  | Leaseholdimprovements |   |  | Motorvehicles |        |   | Total   | 
|                              |  | RMB000             |         |   | RMB000   |  |       | RMB000         |  |  | RMB000               |   |  | RMB000       |        |   | RMB000 | 
|Cost:                         |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At April 1, 2009              |  |                     | 2,814   |   |           |  | 50    |                 |  |  | 133                   |   |  |               | 149    |   |         |  |     |   |  |  | 3,146   |  
|Additions                     |  |                     | 27,545  |   |           |  | 733   |                 |  |  | 587                   |   |  |               | 1,968  |   |         |  | 274  |   |  |  | 31,107  |  
|Disposals                     |  |                     | (80     | ) |           |  | (18   | )               |  |  | (37                   | ) |  |               |       |   |         |  |     |   |  |  | (135    | )
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2010             |  |                     | 30,279  |   |           |  | 765   |                 |  |  | 683                   |   |  |               | 2,117  |   |         |  | 274  |   |  |  | 34,118  |  
|Additions                     |  |                     | 23,824  |   |           |  | 1,173 |                 |  |  |                      |   |  |               | 2,390  |   |         |  | 602  |   |  |  | 27,989  |  
|Disposals                     |  |                     | (356    | ) |           |  |      |                 |  |  | (31                   | ) |  |               |       |   |         |  |     |   |  |  | (387    | )
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2011             |  |                     | 53,747  |   |           |  | 1,938 |                 |  |  | 652                   |   |  |               | 4,507  |   |         |  | 876  |   |  |  | 61,720  |  
|Additions                     |  |                     | 10,809  |   |           |  |      |                 |  |  | 37                    |   |  |               |       |   |         |  |     |   |  |  | 10,846  |  
|Derecognition of a subsidiary |  |                     | (148    | ) |           |  | (42   | )               |  |  |                      |   |  |               |       |   |         |  |     |   |  |  | (190    | )
|Disposals                     |  |                     | (341    | ) |           |  |      |                 |  |  | (7                    | ) |  |               |       |   |         |  |     |   |  |  | (348    | )
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2012             |  |                     | 64,067  |   |           |  | 1,896 |                 |  |  | 682                   |   |  |               | 4,507  |   |         |  | 876  |   |  |  | 72,028  |  
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|                              |  |                     |         |   |           | 
|Depreciation:                 |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At April 1, 2009              |  |                     | (622    | ) |           |  | (14   | )               |  |  | (51                   | ) |  |               | (12    | ) |         |  |     |   |  |  | (699    | )
|Charge for the year           |  |                     | (2,097  | ) |           |  | (13   | )               |  |  | (62                   | ) |  |               | (204   | ) |         |  | (76  | ) |  |  | (2,452  | )
|Eliminated on disposals       |  |                     | 50      |   |           |  | 7     |                 |  |  | 22                    |   |  |               |       |   |         |  |     |   |  |  | 79      |  
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2010             |  |                     | (2,669  | ) |           |  | (20   | )               |  |  | (91                   | ) |  |               | (216   | ) |         |  | (76  | ) |  |  | (3,072  | )
|Charge for the year           |  |                     | (13,688 | ) |           |  | (317  | )               |  |  | (192                  | ) |  |               | (1,241 | ) |         |  | (163 | ) |  |  | (15,601 | )
|Eliminated on disposals       |  |                     | 216     |   |           |  |      |                 |  |  | 22                    |   |  |               |       |   |         |  |     |   |  |  | 238     |  
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2011             |  |                     | (16,141 | ) |           |  | (337  | )               |  |  | (261                  | ) |  |               | (1,457 | ) |         |  | (239 | ) |  |  | (18,435 | )
|Charge for the year           |  |                     | (18,833 | ) |           |  | (379  | )               |  |  | (203                  | ) |  |               | (1,492 | ) |         |  | (175 | ) |  |  | (21,082 | )
|Derecognition of a subsidiary |  |                     | 33      |   |           |  | 4     |                 |  |  |                      |   |  |               |       |   |         |  |     |   |  |  | 37      |  
|Eliminated on disposals       |  |                     | 301     |   |           |  |      |                 |  |  | 7                     |   |  |               |       |   |         |  |     |   |  |  | 308     |  
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2012             |  |                     | (34,640 | ) |           |  | (712  | )               |  |  | (457                  | ) |  |               | (2,949 | ) |         |  | (414 | ) |  |  | (39,172 | )
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|                              |  |                     |         |   |           | 
|Carrying values               |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2010             |  |                     | 27,610  |   |           |  | 745   |                 |  |  | 592                   |   |  |               | 1,901  |   |         |  | 198  |   |  |  | 31,046  |  
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2011             |  |                     | 37,606  |   |           |  | 1,601 |                 |  |  | 391                   |   |  |               | 3,050  |   |         |  | 637  |   |  |  | 43,285  |  
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  
|At March 31, 2012             |  |                     | 29,427  |   |           |  | 1,184 |                 |  |  | 225                   |   |  |               | 1,558  |   |         |  | 462  |   |  |  | 32,856  |  
|                              |  |                     |         |   |           |  |       |                 |  |  |                       |   |  |               |        |   |         |  |      |   |  |  |         |  



F-28



---

##### Table of Contents

|18. | INVESTMENTS IN ASSOCIATES
|--- | -------------------------



|                                             |  |              |        |   |         |  |        |         |  |  |        |  
|-------------------------------------------- |  | ------------ | ------ | - | ------- |  | ------ | ------- |  |  | ------ | -
|                                             |  | At March 31, |       
|                                             |  | 2010         |        |   | 2011    |  |        | 2012    | 
|                                             |  | RMB000      |        |   | RMB000 |  |        | RMB000 | 
|                                             |  |              |       
|Cumulative cost of investments in associates |  |              | 13,110 |   |         |  | 13,110 |         |  |  | 14,710 |  
|Cumulative share of results of associates    |  |              | (1,338 | ) |         |  | (7,350 | )       |  |  | (8,236 | )
|Impairment of investment in an associate (i) |  |              |       |   |         |  | (5,760 | )       |  |  | (5,760 | )
|                                             |  |              |        |   |         |  |        |         |  |  |        |  
|                                             |  |              | 11,772 |   |         |  |       |         |  |  | 714    |  
|                                             |  |              |        |   |         |  |        |         |  |  |        |  



|(i) | The Group recognized a RMB5,760,000 impairment of its investment in Hangzhou Guanzhun Technologies Co., Ltd. (Guanzhun) during the year ended March 31,
2011, due to the continuing poor business performance and negative discounted cash flow forecast of the investee.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Particulars of the Groups investments in associates are as follows:



|                                                        |  |                         |            |  |                                               |  |     |                      |  |  |      |   |  |  |    |   |  |                                           
|------------------------------------------------------- |  | ----------------------- | ---------- |  | --------------------------------------------- |  | --- | -------------------- |  |  | ---- | - |  |  | -- | - |  | ------------------------------------------
|                                                        |  | Issuedandpaid upcapital |            |  | Portion ofregistered capitalheld by the Group |  |     | Principal activities
|                                                        |  |                         | March 31,  |  |                                              
|Name of associates                                      |  | RMB                     |            |  | 2010                                          |  |     | 2011                 |  |  | 2012 |   | 
|                                                        |  |                         |            |  | %                                             |  |     | %                    |  |  | %    |   |  | 
|Zhang Xing Wu Xian Technologies (Beijing) Co., Ltd. (a) |  |                         | 500,000    |  |                                               |  | 37  | %                    |  |  | 37   | % |  |  | 37 | % |  | Mobile application and content provider   
|Hangzhou Sibi Technologies Co., Ltd. (b)                |  |                         | 300,000    |  |                                               |  | 33  | %                    |  |  | 33   | % |  |  | 33 | % |  | Mobile application and content provider   
|Guanzhun (c)                                            |  |                         | 15,000,000 |  |                                               |  | 45  | %                    |  |  | 45   | % |  |  | 45 | % |  | Development of mobile application software
|Shenzhen Heisha Technologies Co., Ltd. (d)              |  |                         | 11,445,878 |  |                                               |  | Nil |                      |  |  | Nil  |   |  |  | 31 | % |  | Provision of mobile application service   



|(a) | In March 2009, the Group acquired 37% of the equity interest in Zhang Xing Wu Xian Technologies (Beijing) Co. Ltd for cash consideration of RMB500,000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | In February 2009, Mijia, together with another two individuals independent from the entities within the Group, established Hangzhou Sibi Technologies Co., Ltd
(Sibi). Mijia invested RMB100,000 and obtained a 33.3% equity interest in Sibi.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | In September 2009, Sky, together with the holder of the convertible redeemable preferred shares and a group of individuals independent from the entities within the
Group, established Guanzhun. Sky contributed RMB12,510,000 and obtained a 45% equity interest in Guanzhun.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | The Group held 65% interest of Shenzhen Heisha Technologies Co., Ltd. (Heisha) and consolidated it before April 2011. In April 2011, the Group partially
disposed its interests in Heisha and retained 31% equity interest, the fair value of the remaining 31% interest of Heisha was approximately RMB 1,600,000 (Note 24).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-29



---

##### Table of Contents

A summary of financial information in respect of the Groups associates is set out
below:



|                                          |  |              |        |  |         |  |       |         |  |  |        | 
|----------------------------------------- |  | ------------ | ------ |  | ------- |  | ----- | ------- |  |  | ------ | 
|                                          |  | At March 31, |       
|                                          |  | 2010         |        |  | 2011    |  |       | 2012    | 
|                                          |  | RMB000      |        |  | RMB000 |  |       | RMB000 | 
|Total assets                              |  |              | 14,058 |  |         |  | 8,692 |         |  |  | 17,208 | 
|Total liabilities                         |  |              | 1,427  |  |         |  | 9,565 |         |  |  | 13,918 | 
|                                          |  |              |        |  |         |  |       |         |  |  |        | 
|Net assets                                |  |              | 12,631 |  |         |  | (873  | )       |  |  | 3,290  | 
|                                          |  |              |        |  |         |  |       |         |  |  |        | 
|Groups share of net assets of associates |  |              | 5,901  |  |         |  |      |         |  |  | 714    | 
|                                          |  |              |        |  |         |  |       |         |  |  |        | 



|                                    |  |                       |       |  |         |  |        |         |  |  |        | 
|----------------------------------- |  | --------------------- | ----- |  | ------- |  | ------ | ------- |  |  | ------ | 
|                                    |  | Years Ended March 31, |      
|                                    |  | 2010                  |       |  | 2011    |  |        | 2012    | 
|                                    |  | RMB000               |       |  | RMB000 |  |        | RMB000 | 
|Total revenue                       |  |                       | 1,587 |  |         |  | 3,495  |         |  |  | 14,869 | 
|Loss for the year                   |  |                       | 3,375 |  |         |  | 15,423 |         |  |  | 7,760  | 
|Groups share of loss of associates |  |                       | 1,255 |  |         |  | 6,012  |         |  |  | 886    | 



|19. | TRADE AND OTHER PAYABLES
|--- | ------------------------



|                                                  |  |              |         |  |         |  |         |         |  |  |         | 
|------------------------------------------------- |  | ------------ | ------- |  | ------- |  | ------- | ------- |  |  | ------- | 
|                                                  |  | At March 31, |        
|                                                  |  | 2010         |         |  | 2011    |  |         | 2012    | 
|                                                  |  | RMB000      |         |  | RMB000 |  |         | RMB000 | 
|Trade payable                                     |  |              | 29,832  |  |         |  | 53,249  |         |  |  | 71,608  | 
|Accrued payroll and employee welfare              |  |              | 13,011  |  |         |  | 19,662  |         |  |  | 19,927  | 
|Other taxes payable                               |  |              | 7,997   |  |         |  | 8,428   |         |  |  | 6,239   | 
|Payable for acquisition of property and equipment |  |              | 15,083  |  |         |  | 891     |         |  |  | 398     | 
|Accrued commission                                |  |              | 35,576  |  |         |  | 27,320  |         |  |  |        | 
|Accrued expenses                                  |  |              | 979     |  |         |  | 11,878  |         |  |  | 6,793   | 
|Advance from customers                            |  |              |        |  |         |  | 7,659   |         |  |  | 12,939  | 
|Other payables                                    |  |              | 1,086   |  |         |  | 6,692   |         |  |  | 4,028   | 
|                                                  |  |              |         |  |         |  |         |         |  |  |         | 
|Total                                             |  |              | 103,564 |  |         |  | 135,779 |         |  |  | 121,932 | 
|                                                  |  |              |         |  |         |  |         |         |  |  |         | 



|20. | CONVERTIBLE REDEEMABLE PREFERRED SHARES AND WARRANTS
|--- | ----------------------------------------------------

Series A Convertible Redeemable Preferred Shares

In August
2007, the Company issued 50,000,000 Series A Convertible Redeemable Preferred Shares (Series A Shares), with a par value of US$0.00005 per share, at an initial price of US$0.07 per share for gross proceeds of approximately
RMB26,516,000 (US$3,500,000). The Company paid RMB1,329,000 in issuance costs that have been recorded as finance cost. Upon completion of the Companys IPO in December 2010, all Series A Shares were converted into 50,000,000 ordinary shares.

The key terms of the Series A Shares were as follows:

Purchase price adjustment:

The arrangement provided that the total
purchase price would increase to US$5 million if the Groups audited revenues for the year ended June 30, 2008 reach RMB70 million (the Triggering Event). The Triggering Event was not met.

Dividends:

Subject to
the provisions of Cayman Law, no cash dividends shall be declared or paid on the common shares, unless and until a dividend-in-like amount is declared or paid on each outstanding Series A Share on an as-if-converted basis.



F-30



---

##### Table of Contents

Each Series A Shares shareholder shall be entitled to receive, annually and when, as
and if declared by the board, preferential, non-cumulative dividends at the rate equal to the greater of (1) 8% of its total investment amount and (2) the dividend that would be paid on an as-converted basis. All accrued but unpaid
dividends shall be paid in cash upon the closing of a qualified initial public offering resulting in gross proceeds to the Company of at least US$50 million (prior to any underwriters commissions and expenses) that reflects a market
valuation of the Company of not less than US$200 million (Qualified IPO).

Conversion:

Each Series A Share is convertible at the option of the holder into common share on a one-for-one basis at any time. The conversion
ratios of the Series A Shares are subject to anti-dilution adjustments in the event of issuances by the Company of additional securities at a price per share lower than the respective issuance price of the Series A Shares.

The Series A Shares will automatically convert into common shares upon (i) a Qualified IPO; or (ii) the vote of at least
75% of the then-outstanding Series A Shares.

Voting:

The Series A Shares shareholders are entitled to vote on an as-converted basis.

Liquidation:

The
holders of Series A Shares have preference over holders of common shares with respect to distributions in the event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary.

Before any distribution shall be made to the common shareholders, each Series A shareholder shall be entitled to receive a pro rata
amount equal to 150% of the total actual Series A Shares purchase price per share then held (adjusted for share splits, share dividends, recapitalizations, and similar transactions), plus all dividends accrued and unpaid thereon, as adjusted.
If upon any such liquidation, distribution, or winding up, the assets of the Company shall be insufficient to permit payment to the Series A shareholders the full amount to which they shall be entitled, such assets shall be distributed solely
among the Series A shareholders ratably in proportion to the full amounts to which they would otherwise be entitled.

After paying in full the amounts due to the Series A shareholders, the remaining assets available for distribution to the common
shareholders shall be distributed pro rata among the Series A shareholders and the common shareholders on an as-converted basis.

Redemption:

Beginning
on or after August 2, 2011, the Series A shareholders may require, upon written notice, that the Company redeem in cash all or a portion of the then-outstanding Series A Shares at a price that is equal to the greater of (i) the
actual Series A Shares purchase price, plus all accrued and unpaid dividends, and (ii) the fair market value of the Series A Shares (the Redemption Price).

ESOP anti-dilutive clause:

With respect to any share options granted under
the Groups ESOP plan within one year after the closing of Series A Shares financing, the Company is required to repurchase 25% of the common shares issued from the stock option plan at the market price and issue an equivalent number of
Series A Shares to the Series A shareholders at the same price that the Company paid to repurchase the shares

On
March 1, 2010, the Company and the Series A shareholders entered into an amendment agreement (the Amendment), whereby (i) the Company shall sell 5,000,000 common shares to the Series A shareholders at par value of
US$0.00005 per share for total cash consideration of US$250 and (ii) the Series A shareholders shall waive their right to the share option anti-dilution clause. The Group recorded the intrinsic value of the 5,000,000 shares of
RMB44,439,000 (US$6,519,000), equal to the fair value of the common shares on March 1, 2010 less the exercise price of US$250, as a loss on modification of convertible redeemable preferred shares in the consolidated statements of comprehensive
income with a corresponding increase in share-settled reserves.

Warrants

In conjunction with the issuance of Series A Shares, the Company also issued warrants to purchase up to (i) 7,142,800
Series A Shares at an exercise price of US$0.07 per share if the Triggering Event does not occur, or (ii) 5,000,000 Series A Shares at an exercise price of US$0.1 per share if the Triggering Event occurs. The warrants may be exercised
at any time within 24 months after the closing date. If the warrants are exercised before the occurrence of the Triggering Event, (i) the holders of the warrants shall be entitled to purchase up to a total of 5,000,000 Series A Shares
at an exercise price of US$0.1 per share, and (ii) if the Triggering Event does not occur, the exercise price shall be adjusted to US$0.07 per share, and the Company shall issue an additional 2,142,800 Series A Shares at no additional
cost.



F-31



---

##### Table of Contents

In June 2009, the terms of the warrants were modified to extend the exercise period to the
date of a Qualified IPO and to reduce the number of outstanding warrants to 3,389,800 at an exercise price of US$0.15 per share.

Upon completion of the Companys IPO in December 2010, all the warrants were exercised and 3,389,800 Series A shares were issued which were immediately converted into ordinary shares.

The Company had designated the Series A Shares and warrants as financial liabilities carried at FVTPL (Note 5). The change in
fair value of the Series A Shares and warrants was charged to profit or loss. The movement of the Series A Shares and warrants was set out below:



|                                                |  |                |          |   |          |  |         |  
|----------------------------------------------- |  | -------------- | -------- | - | -------- |  | ------- | -
|                                                |  | Series AShares |          |   | Warrants | 
|                                                |  | RMB000        |          |   | RMB000  | 
|At April 1, 2009                                |  |                | 161,584  |   |          |  | 19,668  |  
|Change of fair value included in profit or loss |  |                | 290,135  |   |          |  | 7,548   |  
|Exchange gain                                   |  |                | (228     | ) |          |  | (28     | )
|                                                |  |                |          |   |          |  |         |  
|At March 31, 2010                               |  |                | 451,491  |   |          |  | 27,188  |  
|Change of fair value included in profit or loss |  |                | (106,684 | ) |          |  | (7,377  | )
|Exchange gain                                   |  |                | (11,682  | ) |          |  | (558    | )
|Converted and exercised                         |  |                | (333,125 | ) |          |  | (19,253 | )
|                                                |  |                |          |   |          |  |         |  
|                                                |  |               
|At March 31, 2011 and 2012                      |  |                |         |   |          |  |        |  
|                                                |  |                |          |   |          |  |         |  



|21. | SHARE CAPITAL
|--- | -------------



|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|-------------------------------------------------------------------------------- |  | ------------------------- | ----------- | ----- | --------------- |  | ----------- | ------ |  |  | ------- | - |  |  | --- | -
|                                                                                 |  |                           |             |       | Legal           |  |             |        | 
|                                                                                 |  | Accountingnumber ofshares |             |       | Number ofshares |  |             | Amount |  |  | Amount  |  
|                                                                                 |  |                           |             |       |                 |  |             | US$    |  |  | RMB000 |  
|Common shares                                                                    |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|Authorized:                                                                      |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|At April 1, 2009 and March 31, 2010 of US$0.01 each                              |  |                           | 937,857,200 | (i)   |                 |  | 4,689,286   |        |  |  | 46,893  |   |  |  | 338 |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|Share split                                                                      |  |                           |            | (iv)  |                 |  | 933,167,914 |        |  |  |        |   |  |  |    |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|As of March 31, 2011 and 2012                                                    |  |                           | 937,857,200 |       |                 |  | 937,857,200 |        |  |  | 46,893  |   |  |  | 338 |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|Issued and fully paid:                                                           |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|At April 1, 2009                                                                 |  |                           | 116,666,600 |       |                 |  | 750,000     |        |  |  | 7,500   |   |  |  | 57  |  
|Restricted share vested                                                          |  |                           | 25,000,000  |       |                 |  |            |        |  |  |        |   |  |  |    |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|At March 31, 2010 (of US$0.01 each)                                              |  |                           | 141,666,600 |       |                 |  | 750,000     |        |  |  | 7,500   |   |  |  | 57  |  
|Restricted share vested                                                          |  |                           | 8,333,400   |       |                 |  |            |        |  |  |        |   |  |  |    |  
|Issue of new shares upon modification of convertible redeemable preferred shares |  |                           | 5,000,000   | (ii)  |                 |  | 25,000      |        |  |  | 250     |   |  |  | 2   |  
|Share split                                                                      |  |                           |            | (iv)  |                 |  | 154,225,000 |        |  |  |        |   |  |  |    |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|                                                                                 |  |                           | 155,000,000 |       |                 |  | 155,000,000 |        |  |  | 7,750   |   |  |  | 59  |  
|Issue of new shares upon IPO                                                     |  |                           | 49,000,000  | (iii) |                 |  | 49,000,000  |        |  |  | 2,450   |   |  |  | 15  |  
|Conversion of Series A Shares upon IPO                                           |  |                           | 50,000,000  | (iii) |                 |  | 50,000,000  |        |  |  | 2,500   |   |  |  | 17  |  
|Exercise of warrants upon IPO                                                    |  |                           | 3,389,800   | (iii) |                 |  | 3,389,800   |        |  |  | 169     |   |  |  | 1   |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|At March 31, 2011 (of US$0.00005 each)                                           |  |                           | 257,389,800 |       |                 |  | 257,389,800 |        |  |  | 12,869  |   |  |  | 92  |  
|Exercise of share options                                                        |  |                           | 784,800     | (v)   |                 |  | 784,800     |        |  |  | 39      |   |  |  |    |  
|At March 31, 2012 (of US$0.00005 each)                                           |  |                           | 258,174,600 |       |                 |  | 258,174,600 |        |  |  | 12,908  |   |  |  | 92  |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|Series A Shares of US$0.01 each                                                  |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|Authorized:                                                                      |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|At April 1, 2009 and March 31, 2010                                              |  |                           | 62,142,800  | (i)   |                 |  | 310,714     |        |  |  | 3,107   |   |  |  | 22  |  
|Share Split                                                                      |  |                           |            | (iv)  |                 |  | 61,832,086  |        |  |  |        |   |  |  |    |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|At March 31, 2011 and 2012                                                       |  |                           | 62,142,800  |       |                 |  | 62,142,800  |        |  |  | 3,107   |   |  |  | 22  |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|Issued and fully paid:                                                           |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|At April 1, 2009 and March 31, 2010                                              |  |                           | 50,000,000  |       |                 |  | 250,000     |        |  |  | 2,500   |   |  |  | 19  |  
|Share Split                                                                      |  |                           |            | (iv)  |                 |  | 49,750,000  |        |  |  |        |   |  |  |    |  
|Conversion of Series A Shares upon IPO                                           |  |                           | (50,000,000 | )     |                 |  | (50,000,000 | )      |  |  | (2,500  | ) |  |  | (19 | )
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  
|At March 31, 2011 and 2012                                                       |  |                           |            |       |                 |  |            |        |  |  |        |   |  |  |    |  
|                                                                                 |  |                           |             |       |                 |  |             |        |  |  |         |   |  |  |     |  



F-32



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##### Table of Contents



|(i) | Sky-mobi Limited was incorporated on April 20, 2007. The authorized share capital of Sky-mobi is approximately RMB360,000 (US$50,000) divided into
50,000 shares (par value of US$1 per share). On July 20, 2007, the issued and unissued share of US$1 each in the capital of Sky-mobi is sub-divided into 100 shares of par value of US$0.01, and designate the shares into
310,714 Series A Shares and 4,689,286 common shares.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(ii) | In March 2010, the Group recorded the intrinsic value of the 5,000,000 shares of RMB44,439,000 (US$6,519,000), equal to the fair value of the common shares on
March 1, 2010 less the exercise price of US$250, as a loss on modification of convertible redeemable preferred shares in the consolidated statements of comprehensive income with a corresponding increase in share-settled reserves. During the
year ended March 31, 2011, the Company issued the 5,000,000 shares and received the cash consideration of RMB2,000 (US$250).
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iii) | In December 2010, the Group had a successful IPO launch in NASDAQ. 49,000,000 shares of US$0.00005 each were issued at an aggregate amount of US$45,570,000. Upon
completion of the IPO, the Series A Shares were converted and the warrants were exercised.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(iv) | In November 2010, the Company approved a 200-for-1 share split on both its common and preferred shares. Subsequent to the split, the Company had authorized 937,857,200
(155,000,000 issued and fully paid) common shares with a par value of US$0.00005 per share and 62,142,800 Series A Shares with a par value of US$0.00005 per share.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(v) | In March 2012, 784,800 fully vested options were exercised and converted into 784,800 common shares with a par value of US$0.00005 per share. The RMB1,284,000 exercise
price which was not received by the end of March 31, 2012 was recorded as a subscription receivable.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|22. | SHARE-BASED PAYMENTS
|--- | --------------------

Employee Share Option Plan (the Plan)

On March 1, 2010, the Company approved an ownership-based compensation scheme for executives and senior employees under which the Company could grant up to 15,000,000 options to purchase its shares.
In accordance with the terms of the Plan, executives and senior employees may be granted options to purchase common shares at an exercise price approved by the shareholders that should be no less than US$0.07 per common share of the Company. The
option holders are not entitled to dividends nor do they have voting rights. The number of options granted is calculated and approved by shareholders. Options have a life of 10 years from the date of grant.

During the years ended March 31, 2010, 2011 and 2012 the Company granted 6,385,400, 4,964,000 and nil share options under the Plan
to executives and senior employees. These options have an exercise price ranging from RMB1.775 (US$0.26) to RMB 6.548 (US$1.00) and vest ratably over the four-years following the grant date.

The fair value of the common shares underlying the options was determined as described in Note 5 for options granted prior to the
Companys IPO or based on current market value for options granted subsequent to the Companys IPO.

The Group used
the Black-Scholes option pricing model to estimate the fair value of the aforementioned share options using the following assumptions:



|                                |  |                          |  |                         
|------------------------------- |  | ------------------------ |  | ------------------------
|                                |  | Year endedMarch 31, 2010 |  | Year endedMarch 31, 2011
|Average risk-free interest rate |  | 1.34% - 2.69%            |  | 1.13% - 3.69%           
|Average expected volatility     |  | 62% - 67%                |  | 61% - 65%               
|Average dividend yield          |  | 0%                       |  | 0%                      
|Average expected life           |  | 3-6 years                |  | 4-6 years               



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##### Table of Contents

The risk-free interest rate was based on the US treasury bond yield curve as of the
valuation date for a period commensurate with the expected life. The expected volatility was estimated based on the historical daily share price volatility of comparable companies over a historical period commensurate with the expected life of the
options. The Group does not expect to declare dividends in the future except for the dividend declared in March 2010 and May 2010. The expected life is estimated based on the Groups estimates of the exercise period.

A summary of the option activity is as follows:



|                              |  |                  |            |   |                                |  |       |                                          |  |  |           | 
|----------------------------- |  | ---------------- | ---------- | - | ------------------------------ |  | ----- | ---------------------------------------- |  |  | --------- | 
|                              |  | Number ofoptions |            |   | Weightedaverageexercise prices |  |       | Weightedaverageremainingcontractual Life | 
|                              |  |                  |            |   | RMB                            |  |       |                                          | 
|Outstanding on April 1, 2009  |  |                  |           |   |                                |  |      |                                          |  |  |          | 
|Granted on March 1, 2010      |  |                  | 6,385,400  |   |                                |  | 1.775 |                                          |  |  | 7.9 years | 
|                              |  |                  |            |   |                                |  |       |                                          |  |  |           | 
|Outstanding on March 31, 2010 |  |                  | 6,385,400  |   |                                |  | 1.775 |                                          |  |  | 7.9 years | 
|Granted on April 1, 2010      |  |                  | 1,443,600  |   |                                |  | 1.775 |                                          |  |  | 8.0 years | 
|Granted on September 15, 2010 |  |                  | 3,320,400  |   |                                |  | 1.775 |                                          |  |  | 8.5 years | 
|Granted on January 6, 2011    |  |                  | 100,000    |   |                                |  | 6.548 |                                          |  |  | 8.8 years | 
|Granted on January 9, 2011    |  |                  | 100,000    |   |                                |  | 6.548 |                                          |  |  | 8.8 years | 
|Forfeited                     |  |                  | (78,350    | ) |                                |  | 1.775 |                                          |  |  |           | 
|                              |  |                  |            |   |                                |  |       |                                          |  |  |           | 
|Outstanding on March 31, 2011 |  |                  | 11,271,050 |   |                                |  | 1.865 |                                          |  |  | 8.1 years | 
|Forfeited                     |  |                  | (1,964,600 | ) |                                |  | 1.775 |                                          |  |  |           | 
|Exercised                     |  |                  | (784,800   | ) |                                |  | 1.775 |                                          |  |  |           | 
|                              |  |                  |            |   |                                |  |       |                                          |  |  |           | 
|Outstanding on March 31, 2012 |  |                  | 8,521,650  |   |                                |  | 1.907 |                                          |  |  | 7.5 years | 
|                              |  |                  |            |   |                                |  |       |                                          |  |  |           | 

Total grant date fair value of options granted on March 1, 2010, April,
2010, September 15, 2010, January 6, 2011 and January 9, 2011 was approximately RMB47,581,000, RMB10,796,000, RMB28,306,000, RMB259,000 and RMB259,000, respectively.

The Company recorded compensation expense of RMB1,702,000, RMB27,922,000 and RMB22,853,000 for the years ended March 31, 2010, 2011
and 2012, respectively.

Options exercisable were nil, 500,000 and 2,123,900 as of March 31, 2010, 2011 and 2012,
respectively.

In respect of the share options exercised during the year ended March 31, 2012, the weighted average share
price at the dates of exercise was RMB3.057 per share.

Restricted Shares

On August 2, 2007, concurrent with the issuance of the Series A Shares, certain founders of the Company, who are also employees
of the Group, entered into an arrangement whereby 75,000,000 of their 150,000,000 common shares became subject to repurchase (Restricted Shares). The Restricted Shares may be repurchased by the Company in the event of the voluntary or
involuntary termination of the employment at a purchase price equal to the par value of the Restricted Shares. The repurchase right terminates in 36 equal monthly installments. The founders retain the voting and dividend rights of, but are
restricted to sell, such non-vested restricted shares. This arrangement has been accounted for as a reverse share split followed by the grant of a restricted share award under a performance-based plan as the founders are employees of the Group.
Accordingly, the Group measured the fair value of the Restricted Shares as of August 2, 2007, or RMB0.22 (US$0.03) per share, and is recognizing the total amount of approximately RMB16,420,000 as compensation expense over the three year deemed
service, or vesting, period. During the years ended March 31, 2010, 2011 and 2012, the Group recognized RMB1,904,000, RMB130,000 and nil as compensation expense, respectively.

On April 1, 2010, Xplane Ltd.(Xplane), the Companys parent company, issued 493,400 of its restricted shares
to its shareholders, who are also employees of the Group. Of these shares, 40% vest on the second anniversary of the grant date and 20% vest on the third, fourth and fifth anniversaries of the grant date, respectively. The Group measured the fair
value of the restricted shares based on the fair value of the Companys shares, as Xplane has no other assets except for its investment in the Group. The fair value of the restricted shares as of April 1, 2010 was RMB126 (US$19) per share.
The Group recognizes the total amount of approximately RMB62,351,000 as compensation expense over the five year deemed service, or vesting, period with a corresponding increase in reserve in the statement of changes in equity. During the years ended
March 31, 2010, 2011 and 2012, the Group recognized nil, RMB22,238,000, and RMB22,238,000 as compensation expense, respectively.



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On March 7, 2012, the Group issued 4,038,176 of its restrict shares to its employees.
At the same time, Xplane also granted 3,340,400 of Sky-mobis restricted shares to employees of the Group. The holders of these shares retain the voting and dividend rights of, but are restricted from selling, such non-vested restricted
shares. The 7,378,576 shares vest 25% on each anniversary of the grant date. The Group measured the fair value of the restricted shares based on the open market quote of the Companys shares, which was RMB2.88 (US$0.46). The Group will
recognize the total amount of RMB21,327,000 as compensation expense over the four year deemed service, or vesting, period with a corresponding increase in reserve in the statement of changes in equity. During the years ended March 31, 2012, the
Group recognized RMB592,000 as compensation expense.



|23. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

(a) Related party balances



|                                                                                                         |  |              |       |  |         |  |     |         |  |  |     | 
|-------------------------------------------------------------------------------------------------------- |  | ------------ | ----- |  | ------- |  | --- | ------- |  |  | --- | 
|                                                                                                         |  | At March 31, |      
|                                                                                                         |  | 2010         |       |  | 2011    |  |     | 2012    | 
|                                                                                                         |  | RMB000      |       |  | RMB000 |  |     | RMB000 | 
|Amounts due from related parties                                                                         |  |              |       |  |         |  |     |         |  |  |     | 
|Non-trade balances                                                                                       |  |              |       |  |         |  |     |         |  |  |     | 
|Amount due from an associate                                                                             |  |              |       |  |         |  |     |         |  |  |     | 
| Zhang Xing Wu Xian Technologies (Beijing) Co., Ltd                                                     |  |              | 153   |  |         |  | 489 |         |  |  |    | 
|Amounts due from shareholders                                                                            |  |              |       |  |         |  |     |         |  |  |     | 
| Song Tao                                                                                               |  |              | 300   |  |         |  |    |         |  |  |    | 
| Series A Shares shareholders                                                                           |  |              | 2,250 |  |         |  |    |         |  |  |    | 
| Xplane Ltd.                                                                                            |  |              |      |  |         |  |    |         |  |  | 126 | 
|Amount due from company controlled by close family member of a director and a shareholder of the Company |  |              |       |  |         |  |     |         |  |  |     | 
| Shenzhen Feidong Technologies Co., Ltd                                                                 |  |              | 81    |  |         |  |    |         |  |  |    | 
|                                                                                                         |  |              |       |  |         |  |     |         |  |  |     | 
|                                                                                                         |  |              | 2,784 |  |         |  | 489 |         |  |  | 126 | 
|                                                                                                         |  |              |       |  |         |  |     |         |  |  |     | 

The amounts due from related parties represent payments to fund operations, except for the amount
receivable from Series A Shares shareholders, which represents a capital injection made by Fanyi on behalf of the Series A Shares shareholders for their 15% equity interest in Guanzhun. The balances are unsecured, non-interest bearing and repayable
on demand.



|                                                     |  |              |       |  |         |  |     |         |  |  |     | 
|---------------------------------------------------- |  | ------------ | ----- |  | ------- |  | --- | ------- |  |  | --- | 
|                                                     |  | At March 31, |      
|                                                     |  | 2010         |       |  | 2011    |  |     | 2012    | 
|                                                     |  | RMB000      |       |  | RMB000 |  |     | RMB000 | 
|Amounts due to related parties                       |  |              |       |  |         |  |     |         |  |  |     | 
|Trade balances                                       |  |              |       |  |         |  |     |         |  |  |     | 
|Amounts due to associates                            |  |              |       |  |         |  |     |         |  |  |     | 
| Zhang Xing Wu Xian Technologies (Beijing) Co., Ltd |  |              | 300   |  |         |  | 239 |         |  |  | 274 | 
| Hangzhou Sibi Technologies Co., Ltd                |  |              | 420   |  |         |  | 656 |         |  |  | 597 | 
|Non-trade balance                                    |  |              |       |  |         |  |     |         |  |  |     | 
| Series A Shares shareholders (Note 12)             |  |              | 5,417 |  |         |  |    |         |  |  |    | 
|                                                     |  |              |       |  |         |  |     |         |  |  |     | 
|                                                     |  |              | 6,137 |  |         |  | 895 |         |  |  | 871 | 
|                                                     |  |              |       |  |         |  |     |         |  |  |     | 

The amounts due to associates are trading in nature. The related party balances are unsecured,
non-interest bearing and repayable on demand.



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##### Table of Contents

(b) Related party transactions

During the years ended March 31, 2010, 2011 and 2012, respectively, significant related party transactions were as follows:



|                                                     |  |                       |       |  |         |  |       |         |  |  |       | 
|---------------------------------------------------- |  | --------------------- | ----- |  | ------- |  | ----- | ------- |  |  | ----- | 
|                                                     |  | Years Ended March 31, |      
|                                                     |  | 2010                  |       |  | 2011    |  |       | 2012    | 
|                                                     |  | RMB000               |       |  | RMB000 |  |       | RMB000 | 
|Cost of revenues (for content)                       |  |                       |       |  |         |  |       |         |  |  |       | 
|Associates                                           |  |                       |       |  |         |  |       |         |  |  |       | 
| Zhang Xing Wu Xian Technologies (Beijing) Co., Ltd |  |                       | 468   |  |         |  | 1,559 |         |  |  | 1,822 | 
| Hangzhou Sibi Technologies Co., Ltd                |  |                       | 777   |  |         |  | 1,856 |         |  |  | 3,724 | 
|                                                     |  |                       |       |  |         |  |       |         |  |  |       | 
|                                                     |  |                       | 1,245 |  |         |  | 3,415 |         |  |  | 5,546 | 
|                                                     |  |                       |       |  |         |  |       |         |  |  |       | 

Beijing Speedpay Technology Co., Ltd., over which the Companys director, Mr. Kui Zhou, has
significant influence, provides payment processing services to the Group. During the years ended March 31, 2010, 2011 and 2012, the Group paid a total of RMB173,900, RMB510,400 and RMB1,373,200, respectively, to Beijing Speedpay Technology Co.,
Ltd.

(c) Key management compensation

The compensation of directors and other key management during the years was as follows:



|                                |  |                      |       |  |         |  |        |         |  |  |        | 
|------------------------------- |  | -------------------- | ----- |  | ------- |  | ------ | ------- |  |  | ------ | 
|                                |  | Year Ended March 31, |      
|                                |  | 2010                 |       |  | 2011    |  |        | 2012    | 
|                                |  | RMB000              |       |  | RMB000 |  |        | RMB000 | 
|Salary and other benefits       |  |                      | 1,608 |  |         |  | 2,226  |         |  |  | 6,548  | 
|Retirement benefit contribution |  |                      | 89    |  |         |  | 11     |         |  |  | 20     | 
|Share-based compensation        |  |                      | 3,606 |  |         |  | 15,114 |         |  |  | 18,472 | 
|                                |  |                      |       |  |         |  |        |         |  |  |        | 
|Total                           |  |                      | 5,303 |  |         |  | 17,351 |         |  |  | 25,040 | 
|                                |  |                      |       |  |         |  |        |         |  |  |        | 



|24. | DERECOGNITION OF A SUBSIDIARY
|--- | -----------------------------

In April 2011, the Group sold a 15% interest in Heisha, a 65% owned and consolidated subsidiary, to the minority shareholder of Heisha for RMB1,152,000. Further, Heisha issued additional preferred shares
to a third party partner, MediaTek Inc. (MTK), which further diluted the Groups ownership percentage to 31%. The Group lost control of Heisha as a result of these transactions. The Groups net assets relative to Heisha were
derecognized upon loss of control and were comprised of the following:



|                                                    |  |         |       |  
|--------------------------------------------------- |  | ------- | ----- | -
|                                                    |  | RMB000 |      
|Net Assets derecognized                             |  |         |       |  
|                                                    | 
|Cash and cash equivalents                           |  |         | 947   |  
|Trade and other receivables                         |  |         | 123   |  
|Property, plant and equipment                       |  |         | 153   |  
|Trade and other payables                            |  |         | (100  | )
|                                                    |  |         |       |  
|Net amount derecognized before capital injection    |  |         | 1,123 |  
|Capital injection by MTK                            |  |         | 6,446 |  
|                                                    |  |         |       |  
|Net amount derecognized including capital injection |  |         | 7,569 |  
|                                                    |  |         |       |  

The gain recognized in profit or loss upon deconsolidation of Heisha was calculated as follows:



|                                                             |  |         |        |  
|------------------------------------------------------------ |  | ------- | ------ | -
|                                                             |  | RMB000 |       
|                                                             | 
|Consideration received                                       |  |         | 1,152  |  
|Net assets derecognized                                      |  |         | (1,123 | )
|Non-controlling interest                                     |  |         | 301    |  
|Fair value of the retained interests classified as associate |  |         | 1,600  |  
|                                                             |  |         |        |  
|Gain on derecognition of Heisha                              |  |         | 1,930  |  
|                                                             |  |         |        |  



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##### Table of Contents

|                                            |  |         |       | 
|------------------------------------------- |  | ------- | ----- | 
|                                            |  | RMB000 |      
|Net Cash inflow arising on derecognition:   |  |         |       | 
|                                            | 
|Cash consideration received                 |  |         | 1,152 | 
|Less: cash and cash equivalents disposed of |  |         | 947   | 
|                                            |  |         |       | 
|                                            |  |         | 205   | 
|                                            |  |         |       | 

The fair value of the residual interests of the Group in Heisha was calculated based on the price
invested in Heisha by MTK, using the backsolve method under the Option Pricing Model. The key assumption used in backsolve method included probability of scenarios, exercise values, expected time to liquidity, expected volatility, risk free interest
rate and discount for lack of marketability.



|25. | OPERATING LEASES
|--- | ----------------

The
Group has operating lease agreements principally for its office properties in the PRC with lease terms between one to two years. These leases are renewable upon negotiation.

The Groups commitments for future minimum lease payments under non-cancelable operating lease agreements are as follows:



|                                        |  |              |        |  |         |  |       |         |  |  |        | 
|--------------------------------------- |  | ------------ | ------ |  | ------- |  | ----- | ------- |  |  | ------ | 
|                                        |  | At March 31, |       
|                                        |  | 2010         |        |  | 2011    |  |       | 2012    | 
|                                        |  | RMB000      |        |  | RMB000 |  |       | RMB000 | 
|Within one year                         |  |              | 7,278  |  |         |  | 9,038 |         |  |  | 8,211  | 
|In the second to fifth years, inclusive |  |              | 6,080  |  |         |  | 755   |         |  |  | 16,042 | 
|                                        |  |              |        |  |         |  |       |         |  |  |        | 
|Total                                   |  |              | 13,358 |  |         |  | 9,793 |         |  |  | 24,253 | 
|                                        |  |              |        |  |         |  |       |         |  |  |        | 



|26. | PROFIT APPROPRIATION
|--- | --------------------

Pursuant to the relevant laws and regulations in the PRC applicable to foreign-investment corporations, the Groups PRC subsidiaries
are required to maintain a statutory reserve which is non-distributable. They are required to transfer 10% of their profit after taxation, as determined on a calendar year basis and in accordance with PRC GAAP, if any, to the statutory reserve until
the balance reaches 50% of their registered capital. The amount of this statutory reserve is the same under both PRC GAAP and IFRS and is reflected as statutory reserve in the consolidated statements of changes in equity. These reserves are not
distributable as cash dividends. The difference between the net profit, as determined under PRC GAAP, and the amount allocated to statutory reserve, for each of PRC subsidiaries represents amounts that are free of restriction. Such amounts differ
from subsidiary equity less statutory reserve as determined IFRS due to accounting differences between PRC GAAP and IFRS.

At
their discretion, the PRC subsidiaries may allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. PRC regulations currently permit payment of dividends only out of the Groups PRC
subsidiaries accumulated profits as determined in accordance with PRC accounting standards and regulations. The statutory reserve amounted to 500,000, RMB1,000,000 and RMB1,000,000 as of March 31, 2010, 2011 and 2012, respectively. The
Groups PRC subsidiaries have not allocated any of their after-tax profits to the staff welfare and bonus funds for any period presented.

In addition, the registered capital of the Companys PRC subsidiaries of RMB102,542,000 as of March 31, 2012 was considered restricted due to restrictions on the distribution of registered share
capital.

As a result of these PRC laws and regulations, the Companys PRC subsidiaries are restricted in their ability
to transfer a portion of their net assets, either in the form of dividends, loans or advances. Such restricted portion amounted to RMB35,254,000, RMB106,371,000 and RMB108,042,000 as of March 31, 2010, 2011 and 2012, respectively.



|27. | APPROVAL OF FINANCIAL STATEMENTS
|--- | --------------------------------

The financial statements were approved by the board of directors and authorized for issue on June 29, 2012.

* * * * *



F-37